Problem 21-1B

Preparing and analyzinga flexible budget

P1

Toho Company reports the following fixed budget. It is based on an expected production and sales volume of 20,000 units.

Fixed Budget (one activity level) Flexible Budget (three activity levels) Sales (in units). . . ..... 100 Sales (in units). . . . . . .. 100 120 140 Sales ($800 per unit) . . . . . ... $80,000 Sales ($800 per unit) . . . . . . . .. $80,000 $96,000 $112.000 Variable costs ($360 per unit) . . 36,000 Variable costs ($360 per unit) . . 36,000 43,200 50.400 Contribution margin . . . . . . . . . 44,000 Contribution margin . . . . . . . . 44.000 52,800 61.600 Fixed costs . . . . ... 20,000 Fixed costs . ..... . . . . 20,000 20,000 20.000 Income. . . .. $24,000 Income . . . . . . $24.000 $32,800 $ 41.600ED105 Flexible Budgets Variable Flexible Budget for Unit Sales of Amount Fixed For Month Ended January 31 per Unit Cost 10,000 12,000 14,000 Sales . . .. . . . . . . . $10.00 $100,000 $120,000 $140,000 Variable costs Direct materials . . . . . . ... . 1.00 10,000 12.000 14,000 Direct labor . . . . . . . . . . . . . 1.50 15,000 18,000 21.000 W 1 Mer Amonsequel Budgetted unitcellesys Indirect materials. ....... 0.20 2,000 2.400 2,800 dealmount perunit Sales commissions . . . ... . 2.10 21,000 25.200 29.400 Flexible Budget Costs Total variable costs . . . . ... 4.80 48,000 57.600 67.200 Buddypiter Contribution margin. . . . . . . . . $ 5.20 $ 52,000 $ 62.400 $ 72,800 Seat Fixed costs Depreciation-Machinery . .. $28,000 28,000 28,000 28,000 Supervisory salaries . . . . . .. 11,000 11,000 11,000 11,000 Insurance . . . . . . . . . . . . . . . 1,000 1,000 1,000 1,000 atell galeslevels Total fixed costs. .. . . . . . . . . $40,000 40,000 40,000 40,000 Income . . ..... .. . . . . $ 12,000 $ 22.400 $ 32,800Fixed Budget For Year Ended December 31 Sales . .. . .. . . $3,000,000 Costs Direct materials . . ... 1,200,000 Direct labor. . . . .. .. 260,000 Sales staff commissions 57,000 Depreciation-Machinery . .. .... 250,000 Supervisory salaries. .... 140,000 Shipping . . . . . . . . .. 246,000 Sales staff salaries (fixed annual amount). . .. . 160,000 Administrative salaries . ... . 422,000 Depreciation-Office equipment . .. . 140,000 Income. . . . . $ 125,000