Question
Appliance Possible Inc. (AP) is a manufacturer of toaster ovens. To improve control over operations, the president of AP wants to begin using a flexible
Appliance Possible Inc. (AP) is a manufacturer of toaster ovens. To improve control over operations, the president of AP wants to begin using a flexible budgeting system, rather than use only the current master budget. The following data are available for APs expected costs at production levels of 86,000, 97,000, and 108,000 units.
Variable costs | ||
Manufacturing | $6 per unit | |
Administrative | $4 per unit | |
Selling | $2 per unit | |
Fixed costs | ||
Manufacturing | $138,000 | |
Administrative | $77,000 |
Part 1
Prepare a flexible budget for each of the possible production levels: 86,000, 97,000, and 108,000 units. (List variable costs before fixed costs.)
APPLIANCE POSSIBLE INC. Flexible Production Cost Budget | ||||||
Total Fixed CostsTotal Variable CostsSellingTotal CostsFixed CostsManufacturingProduction LevelsVariable CostsActivity LevelAdministrative | ||||||
SellingTotal CostsAdministrativeProduction LevelsActivity LevelTotal Variable CostsVariable CostsFixed CostsTotal Fixed CostsManufacturing | ||||||
Activity LevelAdministrativeTotal Variable CostsTotal Fixed CostsFixed CostsManufacturingProduction LevelsVariable CostsTotal CostsSelling | ||||||
Fixed CostsTotal Variable CostsTotal CostsSellingTotal Fixed CostsManufacturingProduction LevelsAdministrativeActivity LevelVariable Costs | $ | $ | $ | |||
SellingTotal Fixed CostsManufacturingTotal Variable CostsProduction LevelsActivity LevelTotal CostsAdministrativeVariable CostsFixed Costs | ||||||
Production LevelsTotal Fixed CostsTotal CostsManufacturingTotal Variable CostsAdministrativeFixed CostsSellingActivity LevelVariable Costs | ||||||
Fixed CostsSellingVariable CostsManufacturingProduction LevelsTotal Variable CostsAdministrativeTotal CostsActivity LevelTotal Fixed Costs | ||||||
Fixed CostsTotal Fixed CostsActivity LevelManufacturingTotal Variable CostsAdministrativeTotal CostsSellingVariable CostsProduction Levels | ||||||
Total Fixed CostsFixed CostsTotal Variable CostsSellingVariable CostsTotal CostsActivity LevelProduction LevelsAdministrativeManufacturing | ||||||
Activity LevelManufacturingVariable CostsProduction LevelsTotal Fixed CostsSellingTotal Variable CostsFixed CostsAdministrativeTotal Costs | ||||||
Activity LevelAdministrativeTotal Variable CostsProduction LevelsTotal Fixed CostsSellingVariable CostsTotal CostsManufacturingFixed Costs | ||||||
SellingTotal Variable CostsAdministrativeTotal Fixed CostsTotal CostsProduction LevelsManufacturingFixed CostsVariable CostsActivity Level | $ | $ | $ |
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Part 2
If AP sells the toaster ovens for $16 each, how many units will it have to sell to make a profit of $225,800 before taxes?
Units to be sold |
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