Jake Co. has prepared the following fixed budget for the year, assuming production and sales of 30,000 units. This level of production represents 80% of capacity.Jake Co.Fixed BudgetFor Year Ending December 31Sales ………………………………………………?$1,500,000Cost of goods sold:?? Direct materials ………………………………$540,000? Direct labor ……………………………………300,000? Indirect materials (variable) …………………15,000? Indirect labor (variable) ………………………21,000? Depreciation …………………………………180,000? Salaries ………………………………………90,000? Utilities (80% fixed) …………………………54,000?
Maintenance (40% variable) …………………33,0001,233,000Gross profit ………………………………………?$ 267,000Operating expenses:?? Commissions …………………………………$ 45,000? Advertising (fixed) ……………………………60,000? Wages (variable) ………………………………15,000? Rent ……………………………………………30,000? Total operating expenses ……………………? 150,000Income from operations …………………………?$ 117,000Calculate the following flexible budget amounts at the indicated levels of capacity:?Operations at60% of Capacity?Operations at75% of CapacitySales ? Total variable costs ? Total fixed costs ? Income from operations ?
What will be an ideal response?
Capacity = 30,000 units/80% = 37,500 units per year
| Selling price per unit ($1,500,000/30,000) ……………… | ? | $50.00 |
| Variable costs per unit | ? | ? |
| Direct materials ($540,000/30,000) …………………… | $18.00 | ? |
| Direct labor ($300,000/30,000) ……………………… | 10.00 | ? |
| Indirect materials ($15,000/30,000) …………………… | 0.50 | ? |
| Indirect labor ($21,000/30,000) ……………………… | 0.70 | ? |
| Utilities ($54,000 ? 0.2)/30,000 ……………………… | 0.36 | ? |
| Maintenance ($33,000 ? 0.4)/30,000 ………………… | 0.44 | ? |
| Commissions ($45,000/30,000) ……………………… | 1.50 | ? |
| Wages ($15,000/30,000) ……………………………… | 0.50 | ? |
| Total ($960,000/30,000) ……………………………… | ? | $ 32.00 |
| Contribution margin ($540,000/30,000) ………………… | ? | $ 18.00 |
| Fixed costs: | ? |
| Depreciation ………………………………………………… | $ 180,000 |
| Salaries ……………………………………………………… | 90,000 |
| Utilities ($54,000 ? 0.8) …………………………………… | 43,200 |
| Maintenance ($33,000 ? 0.6) ……………………………… | 19,800 |
| Advertising ………………………………………………… | 60,000 |
| Rent ………………………………………………………… | 30,000 |
| Total Fixed costs …………………………………………… | $423,000 |
Total variable costs = 22,500 ? $32 = $720,000
Operations at 75% of capacity (28,125 units): Sales = 28,125 ? $50 = $1,406,250
Total variable costs = 28,125 ? $32 = $900,000
| ? | 60% of Capacity | ? | 75% of Capacity |
| Sales ……………………………………………… | $1,125,000 | ? | $1,406,250 |
| Total variable costs ……………………………… | $ 720,000 | ? | $ 900,000 |
| Total fixed costs ………………………………… | $ 423,000 | ? | $ 423,000 |
| Income from operations ………………………… | $ (18,000 | ) | $ 83,250 |
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