Question
A new accounting intern at Gibson Corporation lost the only copy of this period's master budget. The CFO wants to evaluate performance for this period
A new accounting intern at Gibson Corporation lost the only copy of this period's master budget. The CFO wants to evaluate performance for this period but needs the master budget to do so. Actual results for the period follow: Sales volume 250,000 units Sales revenue $ 1,400,000 Variable costs Manufacturing 308,000 Marketing and administrative 126,000 Contribution margin $ 966,000 Fixed costs Manufacturing 386,000 Marketing and administrative 217,150 Operating profit $ 362,850 The company planned to produce and sell 202,500 units for $5.00 each. At that volume, the contribution margin would have been $708,750. Variable marketing and administrative costs are budgeted at 10 percent of sales revenue. Manufacturing fixed costs are estimated at $2.00 per unit at the normal volume of 202,500 units. Management notes, "We budget an operating profit of $1.00 per unit at the normal volume."
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