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Crane Corporations master (static) budget for the year is shown below: Sales (60,500 units) $ 2,178,000 Cost of goods sold: Direct materials $ 199,650 Direct
Crane Corporations master (static) budget for the year is shown below:
Sales (60,500 units) | $ | 2,178,000 | |||||||
Cost of goods sold: | |||||||||
Direct materials | $ | 199,650 | |||||||
Direct labor | 484,000 | ||||||||
Overhead (variable overhead applied at 30% of direct labor cost) | 245,000 | 928,650 | |||||||
Gross profit | $ | 1,249,350 | |||||||
Selling expenses: | |||||||||
Sales commissions (all variable) | $ | 161,656 | |||||||
Rent (all fixed) | 45,000 | ||||||||
Insurance (all short-term fixed) | 35,000 | ||||||||
General expenses: | |||||||||
Salaries (all short-term fixed) | 94,500 | ||||||||
Rent (all short-term fixed) | 79,500 | ||||||||
Depreciation (all short-term fixed) | 55,000 | 470,656 | |||||||
Operating income | $ | 778,694 | |||||||
Required:
1. During the year, the company manufactured and sold 55,500 units of product. Prepare a flexible budget for this level of output.
2. Now suppose that the actual level of output was 65,500 units. Prepare a flexible budget for this output level.
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