Outdoor Outfitters has created a flexible budget for the 70,000-unit and the 80,

Question

Outdoor Outfitters has created a flexible budget for the 70,000-unit and the 80,000-unit levels of activity as shown below. Complete Outdoor Outfitters's flexible budget at the 97,800-unit level of activity. Assume that the cost of goods sold and variable operating expenses vary directly with sales and that income taxes remain at 30 percent of operating income. (Omit the "$" sign in your response.)

Outdoor Outfitters has created a flexible budget for the 70,000-unit and the 80,000-unit levels of activity as shown below. Complete Outdoor Outfitters's flexible budget at the 97,800-unit level of activity. Assume that the cost of goods sold and variable operating expenses vary directly with sales and that income taxes remain at 30 percent of operating income. (Omit the "$" sign in your response.)

Explanation / Answer

Selling price per unit = 1400000/70000= $20 Sales for 97,800-units = 20*97,800=$1956000 Cost of good sold per unit =840000/70000= 12 Cost of good sold for 97800 = 12*97,800=$11736000 Variable portion of Operating expnese =(370000-90000)/70000 =$4 Operating expnese for 97800 units = 4*97800+90000=$481200 Operating income = $(1956000-11736000-481200)*(1-30%) = $210840 70,000 Units 80,000 Units 97,800-units Sales $ 14,00,000 $ 16,00,000 $ 1956000 Cost of goods sold 8,40,000 9,60,000 1173600 Gross profit on sales $ 5,60,000 $ 6,40,000 $ 782400 Operating expenses ($90,000 fixed) 3,70,000 4,10,000 481200 Operating income $ 1,90,000 $ 2,30,000 $ 301200 Income taxes (30% of operating income) 57,000 69,000 90360 Net income $ 1,33,000 $ 1,61,000 $ 210840

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