Answer:
Sales ($20.00×26,000 units) $520,000
Less Variable Costs ( $4.00× 26,000 units) $104,000
Contribution $416,000
Less Fixed Cost ($7.50× 26,000 units) $195,000
Net Income $221,000
Explanation:
A flexed Budget shows the Budgeted Costs and Revenues for the Actual Activity at Budgeted/Standard Cost or Sales per Unit.
<u>First Determine the Standard Cost and Selling Prices using an Activity level of 20,000 units</u>
Sales ($400,000/ 20,000 units) $20.00
Less Variable Costs ( $80,000/ 20,000 units) $4.00
Contribution $16.00
Less Fixed Cost ($150,000/ 20,000 units) $7.50
Net Income $8.50
<u>Then Prepare a flexed Budget Performance at activity of 26,000 units</u>
Sales ($20.00×26,000 units) $520,000
Less Variable Costs ( $4.00× 26,000 units) $104,000
Contribution $416,000
Less Fixed Cost ($7.50× 26,000 units) $195,000
Net Income $221,000
