Question

The master budget at Western Company last period called for sales of 225,000 units at $9 each. The costs were estimated to be $3.75 variable per unit and $225,000 fixed. During the period, actual production and actual sales were 230,000 units. The selling price was $9.10 per unit. Variable costs were $4.50 per unit. Actual fixed costs were $225,000.
Required:
Prepare a flexible budget for Western.

Answer 1

Answer:

Operating profit = $982,500

Explanation:

Given:

Sales = 225,000 units at $9 each

Variable per unit = $3.75

Fixed cost = $225,000

Actual production and actual sales = 230,000 units

Selling price = $9.10 per unit

Variable costs = $4.50 per unit

Actual fixed costs $225,000

Find:

Flexible budget

Computation:

Flexible budget

Particular                                                      Amount

Sales revenue (230,000 x $9)                 $2,070,000

Less: Variable (230,000 x $3.75)              $862,500

Contribution margin                               $1,207,500

Less: Fixed cost                                            225,000

Operating profit                                         $982,500