Kitchen Help Inc. (KHI) is a manufacturer of toaster ovens. To improve control o
ID: 2461978 • Letter: K
Question
Kitchen Help Inc. (KHI) is a manufacturer of toaster ovens. To improve control over operations, the president of KHI wants to begin using a flexible budgeting system, rather than use only the current master budget. The following data are available for KHI's expected costs at production levels of 84,000, 97,000, and 110,000 units. Prepare a flexible budget for each of the possible production levels: 84,000, 97,000, and 110,000 units. (List variable costs before fixed costs.) If KHI sells the toaster ovens for $17 each, how many units will it have to sell to make a profit of $441,000 before taxes? Units to be sold Click if you would like to Show Work for this question:Explanation / Answer
Units Per Unit 84000 97000 110000 Variable Costs Manufacturing 7 588000 679000 770000 Administrative 3 252000 291000 330000 Selling 1 84000 97000 110000 Total variable costs 924000 1067000 1210000 Fixed Costs Manufacturing 143000 143000 143000 Administrative 82000 82000 82000 Total fixed Costs 225000 225000 225000 Total Costs 1149000 1292000 1435000 Selling Price 17 Less Variable costs 11 Contribution 6 Profit 441000 Fixed Costs 225000 Total 666000 Units 666000/6 111000 111000 units must be sold
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