Exercise 16-27 (Algo) Prepare Flexible Budget (LO 16-2) Osage, Inc., manufactures and sells lamps. The company produces only when it receives orders and, therefore, has no inventories. The following information is available for the current month: Actual (based on actual orders for 450,000 units) Master Budget (based on budgeted orders for 480,000 units) Sales revenue $ 4,492,000 $ 4,320,000 Less Variable costs Materials 1,536,000 1,536,000 Direct labor 246,000 312,000 Variable overhead 674,600 624,000 Variable marketing and administrative 395,000 408,000 Total variable costs $ 2,851,600 $ 2,880,000 Contribution margin $ 1,640,400 $ 1,440,000 Less Fixed costs Manufacturing overhead 903,500 875,000 Marketing 285,000 285,000 Administrative 201,000 176,000 Total fixed costs $ 1,389,500 $ 1,336,000 Operating profits $ 250,900 $ 104,000 Required: Prepare a flexible budget for Osage, Inc. (Do not round intermediate calculations.)
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.
Exercise 16-27 (Algo) Prepare Flexible Budget (LO 16-2)
Osage, Inc., manufactures and sells lamps. The company produces only when it receives orders and, therefore, has no inventories. The following information is available for the current month:
| Actual (based on actual orders for 450,000 units) | |||||||||||
| Sales revenue | $ | 4,492,000 | $ | 4,320,000 | |||||||
| Less | |||||||||||
| Variable costs | |||||||||||
| Materials | 1,536,000 | 1,536,000 | |||||||||
| Direct labor | 246,000 | 312,000 | |||||||||
| Variable overhead | 674,600 | 624,000 | |||||||||
| Variable marketing and administrative | 395,000 | 408,000 | |||||||||
| Total variable costs | $ | 2,851,600 | $ | 2,880,000 | |||||||
| Contribution margin | $ | 1,640,400 | $ | 1,440,000 | |||||||
| Less | |||||||||||
| Fixed costs | |||||||||||
| Manufacturing overhead | 903,500 | 875,000 | |||||||||
| Marketing | 285,000 | 285,000 | |||||||||
| Administrative | 201,000 | 176,000 | |||||||||
| Total fixed costs | $ | 1,389,500 | $ | 1,336,000 | |||||||
| Operating profits | $ | 250,900 | $ | 104,000 | |||||||
Required:
Prepare a flexible budget for Osage, Inc. (Do not round intermediate calculations.)
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