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Balmer Corporation's master budget for the year is presented below: Sales (50,000 units) $ 1,600,000 Cost of goods sold: $ 150,000 Direct materials 450,000 Direct

Balmer Corporation's master budget for the year is presented below:

Sales (50,000 units) $ 1,600,000
Cost of goods sold: $ 150,000
Direct materials 450,000
Direct labor 240,000 840,000
Overhead (Variable overhead applied at 40% of direct labor cost) $ 760,000
Gross profit
Selling expenses:
Sales commissions (all variable) $ 160,000
Rent (all fixed) 40,000
Insurance (all fixed) 30,000
General expenses:
Salaries (all fixed) 92,000
Rent (all fixed) 77,000
Depreciation (all fixed) 51,000 450,000
Operating income $ 310,000

During the period, the company manufactured and sold 42,000 units.

Required:

1. Prepare a flexible budget (FB) for the actual output level achieved during the period; state each item at nearest whole dollar. 2. What is the definition of a FB? For what managerial purpose is a FB useful? Be specific about the types of information (and variances) that management can generate, at the end of an accounting period, given a flexible budget and its master (static) budget.

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