Whidbey Co. fixed budget for the year is shown below:Sales (50,000 units) …………………………?$1,300,000Cost of goods sold:?? Direct materials …………………………$150,000? Direct labor ………………………………450,000? Overhead (includes $2 per unit variableoverhead) …………………………………… 240,000 840,000 Gross profit ………………………………?$ 460,000Selling expenses:?? Sales commissions (all variable) …………60,000? Rent (all fixed) ……………………………40,000? Insurance (all fixed) ………………………35,000?General and administrative expenses:?? Salaries (all fixed) ………………………72,000? Rent (all fixed)
……………………………54,000? Depreciation (all fixed) ………………… 31,000 292,000Net income from operations …………………?$ 168,000Prepare a flexible budget for Whidbey Co. that shows a detailed budget for its actual sales volume of 42,000 units. Use the contribution margin format.
What will be an ideal response?
| ? | Flexible Budget | ? | |
Variable Amount per unit | Total Fixed Cost | Flexible Budget for Unit Sales of 42,000 |
| Sales ($1,300,000/50,000) ……………… | $26.00 | ? | $1,092,000 |
| Variable costs: | ? | ? | ? |
| Direct materials ($150,000/50,000) ……… | $ 3.00 | ? | $ 126,000 |
| Direct labor ($450,000/50,000) ………… | 9.00 | ? | 378,000 |
| Variable overhead ………………………… | 2.00 | ? | 84,000 |
| Sales commissions ($60,000/50,000) …… | 1.20 | ? | 50,400 |
| Total variable costs ……………………… | $15.20 | ? | $ 638,400 |
| Contribution margin ……………………… | $10.80 | ? | $ 453,600 |
| Fixed costs: | ? | ? | ? |
| Fixed overhead [$240,000 - ($2 ? 50,000)] | ? | $140,000 | $ 140,000 |
| Rent expense-selling …………………… | ? | 40,000 | 40,000 |
| Insurance expense-selling ………………… | ? | 35,000 | 35,000 |
| Salaries expenses- general and admin…… | ? | 72,000 | 72,000 |
| Rent expenses-general and admin. ...…… | ? | 54,000 | 54,000 |
| Depreciation expense-general and admin. | ? | 31,000 | 31,000 |
| Total fixed costs ………………………… | ? | $372,000 | $ 372,000 |
| Income from operations ………………… | ? | ? | $ 81,600 |
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