Question

Cherokee Manufacturing Company established the following standard price and cost data: Sales price $ 12.00 per unit Variable manufacturing cost $ 7.20 per unit Fixed manufacturing cost $ 3,600 total Fixed selling and administrative cost $ 1,200 total Cherokee planned to produce and sell 2,000 units. Actual production and sales amounted to 2,200 units. Required Prepare the pro forma income statement in contribution format that would appear in a master budget. Prepare the pro forma income statement in contribution format that would appear in a flexible budget.

Answer 1

Answer:

Pro forma income statement in contribution format

Sales ( 2,200 units × $ 12.00)                                        26,400

Less Variable Costs :

Variable manufacturing cost ( 2,200 units × $ 7.20)   (15,840)

Contribution                                                                    10,560

Less Expenses :

Fixed manufacturing cost                                              (3,600)

Fixed selling and administrative cost                            (1,200)

Net Income                                                                      5,760

Explanation:

A flexed budget shows the Budgeted Costs and Revenues at Actual level of production rather than the Budgeted level of production.