le costs change based on the number of subs sold. Compute the budgeted operating income for each of the following deviations from the original budget data. (Consider each case independently.) Alternatives: 1. Determine the budgeted operating income based on the original budget data. 2. A 10% increase in contribution margin, holding revenues constant. 3. A 10% decrease in contribution margin, holding revenues constant.
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.
| The Deli-Sub Shop owns and operates six stores in and around Minneapolis. You are given the following corporate budget data for next year: | ||||||||||
| Revenues | $11,000,000 | |||||||||
| Fixed costs | $3,000,000 | |||||||||
| Variable costs | $7,500,000 | |||||||||
| Variable costs change based on the number of subs sold. |
Compute the budgeted operating income for each of the following deviations from the original budget data. (Consider each case independently.)
Alternatives:
1. Determine the budgeted operating income based on the original budget data.
2. A 10% increase in contribution margin, holding revenues constant.
3. A 10% decrease in contribution margin, holding revenues constant.
4. A 5% increase in fixed costs.
5. A 5% decrease in fixed costs.
6. A 5% increase in units sold.
7. A 5% decrease in units sold.
8. A 10% increase in fixed costs and a 10% increase in units sold.
9. A 5% increase in fixed costs and a 5% decrease in variable costs.
10. Which of these alternatives yields the highest budgeted operating income?
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