1.Use the following data to show how to prepare planned operating budget for Hi-Lo Company for the year ending December 31, 2019: Planned operating budget for Hi-Lo Company for the year ending December 31, 2019.

Plant capacity 100,000 Units

Expected Sales Volume 90,000 Units

Expected Production 90,000 units

Actual Production 90,000 units

Forecasted Selling Price 12.00 Per unit

Actual Selling Price 13.50 per unit

Manufacturing Cost

Variable Per unit

Direct Material 3.60

Direct Labor 1.50

Manufacturing OH 2.25

Fixed Manufacturing OH 108,000

Selling & Administrative

Variable Per unit 1.20

Fixed 60,000

Assume no beginning or ending inventory. Federal income taxes are budgeted at 40% of income before federal income taxes.

2. The actual operating data for the year ending December 31, 2019, follow:

Sales $1,080,000

Cost of goods Sold

Direct Materials $337,500

Direct Labor 135,000

Variable Manufacturing OH 202,000

Fixed Manufacturing OH 108,000

Total 783,000

Less: Ending Inventory(783,000 * 10/90 87,000 $696,000

Gross Margin $384,000

Selling Expenses

Variable $102,000

Fixed 72,000 174,000

Income Before Federal Income Taxes $210,000

Deduct Federal income tax @ 40% 84,000

Net Income 126,000

a.show how to prepare a planned operating budget for the year ended December 31, 2019, for part (1).

b.Using a flexible operating budget, compare expected amounts versus actual.

c.Using the report created in part b., analyze the efficiency of operations and comment on the company's sales and production policies for part (2).