Chapter 8, Problem 3E

To determine

Flexible Budget:

It is the plan that is prepared at different levels of production. In this budget company changes the revenue and expenses as per change in output. It is also known as variable budget.

To prepare: Flexible budget

Explanation of Solution

Flexible budget at 6000, 7000 and 8000 units.

T Company
Flexible Budget
For the quarter ended March 31, 2017
Particulars	Variable cost per unit ($)	Total fixed Cost ($)	Sale of 6,000 units	Sale of 7,000 units	Sale of 8,000 units
			Amount ($)	Amount ($)	Amount ($)
Production (units)			6000	7000	8000
Sales	400		2,400,000	2,800,000	3,200,000
Less : Variable cost
Direct material	40		240,000	280,000	320,000
Direct Labor	70		420,000	490,000	560,000
Production supplies	25		150,000	175,000	200,000
Sales commission	20		120,000	140,000	160,000
Packaging	22		132,000	154,000	176,000
Total variable costs	177		1,062,000	1,239,000	1,416,000
Contribution margin	223		1,338,000	1,561,000	1,784,000
Less: Fixed Costs
Plant manager salary		65,000	65,000	65,000	65,000
Advertising		125,000	125,000	125,000	125,000
Administrative salaries		85,000	85,000	85,000	85,000
Depreciation		35,000	35,000	35,000	35,000
Insurance		20,000	20,000	20,000	20,000
Office Rent		36,000	36,000	36,000	36,000
Total fixed costs		366,000	366,000	366,000	366,000
Income from operations			1,428,000	1,605,000	1,782,000

Table(1)

Thus, income from 6000 units is $1,428,000, 7000 units is $1,605,000 and 8000 units is 1,782,000.