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.) Q1. A 10% increase in contribution margin, holding revenues constant Q2. A 10% decrease in contribution margin, holding revenues constant Q3. A 5% increase in fixed costs Q4. A 5% decrease in fixed costs Q5. A 5% increase in units sold Q6. A 5% decrease in units sold Q7. A 10% increase in fixed costs and a 10% increase in units sold Q8. A 5% increase in fixed costs and a 5% decrease in variable costs Q9. Which of these alternatives yields the highest budgeted operating income? Explain why this is the case.
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.)
Q1. A 10% increase in contribution margin, holding revenues constant
Q2. A 10% decrease in contribution margin, holding revenues constant
Q3. A 5% increase in fixed costs
Q4. A 5% decrease in fixed costs
Q5. A 5% increase in units sold
Q6. A 5% decrease in units sold
Q7. A 10% increase in fixed costs and a 10% increase in units sold
Q8. A 5% increase in fixed costs and a 5% decrease in variable costs
Q9. Which of these alternatives yields the highest budgeted operating income? Explain why this is the case.
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