EXERCISE 23.10

Preparing a Flexible Budget

LO6

The flexible budget at the 70,000-unit and the 80,000-unit levels of activity is shown below.

	70,000 Units	80,000 Units	90,000 Units
Sales	$1,400,000	$1,600,000	$
Cost of goods sold	840,000	960,000	________
Gross profit on sales	$ 560,000	$ 640,000	$
Operating expenses ($90,000 fixed)	370,000	410,000	_________
Operating income	$ 190,000	$ 230,000	$
Income taxes (30% of operating income)	57,000	69,000	_________
Net income	$ 133,000	$ 161,000	$

Complete the flexible budget at the 90,000-unit level of activity. Assume that the cost of goods sold and variable operating expenses vary directly with sales and that income taxes remain at 30 percent of operating income.