The DVD division (DVDD) of Micro Storage Inc. produces DVD drives for personal computers. The drives are assembled from purchased components. The costs (value) added by DVDD are indirect costs (which include assembly labour), packaging, and shipping. Cost behaviour is as follows: 

Both DVD drives require five components. Therefore, the total cost of components for A320 drives (32X) is $500 and for A100 drives (10X) is $200. DVDD uses a six-month continuous budget that is revised monthly. Sales forecasts for the next eight months are as follows: 

Treat each event in succession. 

1. Use spreadsheet software to prepare a table of budgeting information and an operating expense budget for DVDD for October through March. Incorporate the expectation that sales of A100 drives will be 125 percent of A320 drives. Prepare a spreadsheet that can be revised easily for succeeding months. 

2. October’s actual sales were 2,800 A320 drives and 3,600 A100 drives. This outcome has caused DVDD to revise its sales forecasts downward by 10 percent. Revise the operating expense budget for November through April. 

3. At the end of November, DVDD decides that the proportion of A320 drives to A100 drives is changing. Sales of A100 drives are expected to be 150 percent of A320 drive sales. Expected sales of A320 drives are unchanged from requirement 2. Revise the operating expense budget for December through May.

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Fixed Variable Purchased components 32X drives $100 per component $ 40 per component $40,000 $ 16 per component 10X drives Indirect costs $ 8,000 $ 4 per drive $ 8,000 $ 2 per drive Packaging Shipping A320 Drives A100 Drives Otober 3,200 units 4,000 units November 2,400 3,000 December 5,600 7,000 January 3,200 February 3,200 2,400 2,400 4,000 4,000 March 3,000 April May 3,000 2,800 3,500