Concept explainers
1.
The items listed in the flexible budget as variable or fixed and their amount per unit or for the year.
1.
Explanation of Solution
Fixed cost ($) | |||
Cost | Total | Per unit | |
Variable cost: | |||
Direct materials | 1,200,000 | 60.00 | |
Direct labor | 260,000 | 13.00 | |
Machinery repairs | 57,000 | 2.85 | |
Utilities | 50,000 | 2.50 | |
Packaging | 80,000 | 4.00 | |
Shipping | 116,000 | 5.80 | |
Fixed cost: | |||
Utilities | 150,000 | ||
Plant manager salaries | 140,000 | ||
250,000 | |||
Sales salary | 160,000 | ||
Advertising expense | 81,000 | ||
Administrative salaries | 241,000 | ||
Entertainment expense | 90,000 |
Thus, the variable costs per unit and in total and the fixed costs in total are as mentioned above.
2.
The flexible budget.
2.
Explanation of Solution
The flexible budget for 18,000 and 24,000 units.
Particulars | Variable cost per unit ($) | Total fixed cost ($) | ||
Production | 18,000 units | 24,000 units | ||
Sales | 2,700,000 | 3,600,000 | ||
Less: Variable costs | ||||
Direct materials | 60.00 | 1,080,000 | 1,440,000 | |
Direct labor | 13.00 | 234,000 | 312,000 | |
Machinery repairs | 2.85 | 51,300 | 68,400 | |
Utilities | 2.50 | 45,000 | 60,000 | |
Packaging | 4.00 | 72,000 | 96,000 | |
Shipping | 5.80 | 104,400 | 139,200 | |
Total variable cost | 1,586,700 | 2,115,600 | ||
Less: Fixed costs | ||||
Utilities | 150,000 | 150,000 | 150,000 | |
Plant manager salaries | 140,000 | 140,000 | 140,000 | |
Depreciation | 250,000 | 250,000 | 250,000 | |
Sales salary | 160,000 | 160,000 | 160,000 | |
Advertising expense | 81,000 | 81,000 | 81,000 | |
Administrative salaries | 241,000 | 241,000 | 241,000 | |
Entertainment expense | 90,000 | 90,000 | 90,000 | |
Total fixed cost | 1,112,000 | 1,112,000 | 1,112,000 | |
Total | 2,698,700 | 3,227,600 | ||
Budgeted income | 1,300 | 372,400 |
Thus, the budgeted income for the 18,000 units is $1,300 and for 24,000 units is $372,400.
3.
The increase in the operating income.
3.
Explanation of Solution
Given,
The sales volume is of 28,000 units.
The budgeted amount is $125,000.
Compute increase in the operating income.
The formula to calculate the increase is,
Substitute $619,800 for the budgeted income on expected units (refer working note) and $125,000 for the given budgeted income in the above formula.
The increase in operating income is $494,800.
Working note:
Calculation of the variable cost per unit:
The variable cost per unit is $88.15.
Calculation of the budgeted income at 28,000 units,
Particulars | Amount ($) |
Sales | 4,200,000 |
Less: Variable costs | 2,468,200 |
Less: Fixed costs | 1,112,000 |
Budgeted income | 619,800 |
Hence, the operating income would increase by $494,800.
4.
The income or loss from operations if the business falls to 14,000 units.
4.
Explanation of Solution
Given,
The sales units are 14,000 units.
Calculation of the budgeted income or loss,
Particulars | Amount ($) |
Sales | 2,100,000 |
Less: Variable costs | 1,234,100 |
Less: Fixed costs | 1,112,000 |
Budgeted income | (246,100) |
Thus, there is operating loss of $246,100 at the sales level of 14,000 units.
Want to see more full solutions like this?
Chapter 8 Solutions
Managerial Accounting + Connect Access Card
- quesrion 2arrow_forwardAnti-Pandemic Pharma Co. Ltd. reports the following information in its income statement: Sales = $5,250,000; Costs = $2, 173,000; Other expenses = $187,400; Depreciation expense = $79,000; Interest expense= $53,555; Taxes $76,000; Dividends $69,000. $136,700 worth of new shares were also issued during the year and long-term debt worth $65,300 was redeemed. a) Compute the cash flow from assets b) Compute the net change in working capital (325 marks)arrow_forwardQS 15-18 (Algo) Computing and recording over- or underapplied overhead LO P4 A company applies overhead at a rate of 170% of direct labor cost. Actual overhead cost for the current period is $1,081,900, and direct labor cost is $627,000. 1. Compute the under- or overapplied overhead. 2. Prepare the journal entry to close over- or underapplied overhead to Cost of Goods Sold. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the under- or overapplied overhead.arrow_forward
- Question 6 During 2019, Bitsincoins Corporation had EBIT of $100,000, a change in net fixed assets of $400,000, an increase in net current assets of $100,000, an increase in spontaneous current liabilities of $400,000, a depreciation expense of $50,000, and a tax rate of 30%. Based on this information, what is Bitsincoin's free cash flow? (3 marks)arrow_forwardQuestion 4 Waterfront Inc. wishes to borrow on a short-term basis without reducing its current ratio below 1.25. At present its current assets and current liabilities are $1,600 and $1,000 respectively. How much can Waterfront Inc. borrow? (5 marks)arrow_forwarddiscus extensivery source of bussines finances requaments not less than 4 pages font size 12 spacing 1.5 roman times references must be less thhan 5arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education