Study Appendix 7. The high definition LCD division (HDLD) of Fisher Displays produces LCD TV displays. The displays are assembled from purchased components. The costs (value) added by HDLD are indirect costs, which include assembly labor, packaging, and shipping. HDLD produces two sizes of displays: 42 and 50–. Cost behavior of HDLD is as follows:

Both displays require three components per display. Therefore, the total cost of components for 50–displays is $240 and for 42– displays is $165. HDLD uses a 6-month continuous budget that is revised monthly. Sales forecasts reflect the expectation that unit sales of 42– displays will be 25% higher than unit sales of 50– displays. Sales forecasts for the next 8 months are as follows:

Treat each of the following events in succession.

1. Use spreadsheet software to prepare a table of budgeting information and an operating expense budget for HDLD for October–March. Prepare a spreadsheet that can be revised easily for succeeding months in parts 2 and 3.

2. October’s actual sales were 2,800 50– displays and 3,600 42–displays. This outcome has caused HDLD to revise its sales forecasts downward by 10%. Revise the operating expense budget for November–April.

3. At the end of November, HDLD decides that the proportion of 50– to 42– displays is changing. Unit sales of 42– displays are expected to be 50% higher than unit sales of 50– displays sales. Expected sales of 50– displays are unchanged from number 2. Revise the operating expense budget for December–May.

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Fixed Cost/Month Variable Cost Purchased components 50 Displays 42" Displays Assembly labor Packaging Shipping $40,000 8.000 5,000 $80 per component 55 per component 16 per component 4 per display 2 per display 50" Displays 42" Displays 3,200 units 2,40) 5,600) 3,200) 3,200 2,400 2,40) 4.0) units 3,000 7,000 4,000 4,000 3,000 3,000 3,500 December January February March May