Crane Corporation's master budget for the year is shown below: Sales (62,000 units) Cost of goods sold: Direct materials Direct labor $ 198,400 502,200 Overhead (variable overhead applied at 30% of direct labor cost) 260,000 Gross profit Selling expenses: Sales commissions (all variable) Rent (all fixed) Insurance (all short-term fixed) General expenses: Salaries (all short-term fixed) Rent (all short-term fixed) Depreciation (all short-term fixed) Operating income $ 166,222 60,000 50,000 102,000 87,000 70,000 $ 2,294,000 960,600 $ 1,333,400 535,222 $ 798,178 Required: 1. During the year, the company manufactured and sold 57,000 units of product. Prepare a flexible budget for this level of output. 2. Now suppose that the actual level of output was 67,000 units. Prepare a flexible budget for this output level.
Crane Corporation's master budget for the year is shown below: Sales (62,000 units) Cost of goods sold: Direct materials Direct labor $ 198,400 502,200 Overhead (variable overhead applied at 30% of direct labor cost) 260,000 Gross profit Selling expenses: Sales commissions (all variable) Rent (all fixed) Insurance (all short-term fixed) General expenses: Salaries (all short-term fixed) Rent (all short-term fixed) Depreciation (all short-term fixed) Operating income $ 166,222 60,000 50,000 102,000 87,000 70,000 $ 2,294,000 960,600 $ 1,333,400 535,222 $ 798,178 Required: 1. During the year, the company manufactured and sold 57,000 units of product. Prepare a flexible budget for this level of output. 2. Now suppose that the actual level of output was 67,000 units. Prepare a flexible budget for this output level.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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Transcribed Image Text:Crane Corporation's master budget for the year is shown below:
Sales (62,000 units)
Cost of goods sold:
Direct materials
$ 198,400
502,200
Overhead (variable overhead applied at 30% of direct labor cost) 260,000
Direct labor
Gross profit
Selling expenses:
Sales commissions (all variable)
Rent (all fixed)
Insurance (all short-term fixed)
General expenses:
Salaries (all short-term fixed)
Rent (all short-term fixed)
Depreciation (all short-term fixed)
Operating income
$ 166,222
60,000
50,000
102,000
87,000
70,000
$ 2,294,000
960,600
$ 1,333,400
535,222
$ 798,178
Required:
1. During the year, the company manufactured and sold 57,000 units of product. Prepare a flexible budget for this level of output.
2. Now suppose that the actual level of output was 67,000 units. Prepare a flexible budget for this output level.
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