Question
Option #1: Caribbean Company Caribbean Company's fixed budget (based on 12,500 units) for the first quarter of the calendar year 2019 reveals the following information
Option #1: Caribbean Company Caribbean Company's fixed budget (based on 12,500 units) for the first quarter of the calendar year 2019 reveals the following information shown below. Prepare a flexible budget that shows the variable cost per unit, fixed costs, three different variable costs, and three different budgets for sales volumes of 10,000, 12,500 and 15,000. Please analyze your findings in a letter to upper management.
| Fixed | Budget |
Sales 12,500 Units |
| $3,000,000 |
Cost Of Goods Sold |
|
|
Direct Materials | $320,000 |
|
Direct Labor | $480,000 |
|
Production Supplies | $180,000 |
|
Plant Manager Salary | $60,000 | $1,040,000 |
Gross Profit |
| $1,960,000 |
Selling Expenses |
|
|
Sales Commissions | $150,000 |
|
Packaging | $160,000 |
|
Advertising | $120,000 | $430,000 |
Administrative Expenses |
|
|
Administrative Salaries | $100,000 |
|
Depreciation Office Equipment | $40,000 |
|
Insurance | $35,000 |
|
Office Rent | $45,000 | $220,000 |
Income From Operations |
| $1,310,000 |
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