COMPLETE QUESTION IS AS UNDER:
Prepare a flexible budgeted income for 120,000 units using the following information from a static budget for 100,000 units:
$
Sales price 90
DIRECT MATERIAL COST per unit 30
DIRECT LABOUR COST per unit 15
VARIABLE MANUFACTURING COST per unit 13
FIXED MANUFACTURING OH $75,000
VARIABLE SALES AND ADMINISTRATION COST per unit 3
FIXED SALES AND ADMINISTRATION EXPENSE $25,000
TAXES @30% OF INCOME BEFORE TAXES
Answer: FLEXED BUDGET FOR ACTUAL PRODUCTION 120000 UNITS
$
SALES REVENUE (90*120,000) 10,800,000
COST OF SALE
DIRECT MATERIAL COST (30*120,000) 3,600,000
DIRECT LABOUR COST (15*120,000) 1,800,000
V.MANUFACTURING COST (13*120,000) <u>1,560,000</u> <u>(6,960,000)</u>
OPERATING PROFIT 3,840,000
FIXED MANUFACTURING OH (75,000)
V.SALES AND ADMINISTRATION COST (3*120,000) (360,000)
FIXED SALES AND ADMINISTRATION EXPENSE <u>(25,000)</u>
PROFIT BEFORE INTEREST AND TAX 3,380,000
TAX @30% (3,380,000*30%) <u>(1,014,000)</u>
PROFIT AFTER TAX 2,366,000
<u>Explanation:</u>
Flexed budget is based on very simple formula which is:
Total cost = Cost rate per unit * Numbers of actual units sold
