Question

PB11.

Answer 1

COMPLETE QUESTION IS AS UNDER:

LO 7.4 Prepare a flexible budgeted income statement for 47,000 units using the following information from a static budget for 45,000 units:

                                                                                                    $

Sales price                                                                                   50

DIRECT MATERIAL COST per unit                                             12

DIRECT LABOR COST per unit                                                   5

VARIABLE MANUFACTURING overhead per unit                     3

FIXED MANUFACTURING OH                                               $25,000

VARIABLE SALES AND ADMINISTRATION COST per unit       3

FIXED SALES AND ADMINISTRATION EXPENSE                $9,000

TAXES @15% OF INCOME BEFORE TAXES

Answer:

FLEXIBLE BUDGETED INCOME STATEMENT FOR ACTUAL PRODUCTION 47000 UNITS

                                                                                                            $

SALES REVENUE (50*47,000)                                               2,350,000

COST OF SALE

DIRECT MATERIAL COST (12*47,000)    564,000

DIRECT LABOR COST (5*47,000)           235,000

V.MANUFACTURING OH (3*47,000)       141,000                 (940,000)

OPERATING PROFIT                                                               1,410,000

FIXED MANUFACTURING OH                                                 (25,000)

V.SALES AND ADMINISTRATION COST   (3*47,000)            (141,000)

FIXED SALES AND ADMINISTRATION EXPENSE                  (9,000)  

PROFIT BEFORE INTEREST AND TAX                                   1,235,000

TAX @15%     (1,235,000*30%)                                                 (185250)

PROFIT AFTER TAX                                                                 1,049,750

Explanation:

Flexed budget is based on very simple formula which is:

Total cost = Cost rate per unit * Numbers of actual units sold