Exercise 22-7 (Part Level Submission) Appliance Possible Inc. (AP) is a manufact

Question

Exercise 22-7 (Part Level Submission)

Appliance Possible Inc. (AP) is a manufacturer of toaster ovens. To improve control over operations, the president of AP wants to begin using a flexible budgeting system, rather than use only the current master budget. The following data are available for AP’s expected costs at production levels of 90,000, 105,000, and 120,000 units.

Prepare a flexible budget for each of the possible production levels: 90,000, 105,000, and 120,000 units. (List variable costs before fixed costs.) APPLIANCE POSSIBLE INC. Flexible Production Cost Budget

Explanation / Answer

Prepare flexible budget :

units 90000 105000 120000 Variable cost Manufacturing 540000 630000 720000 Administrative 360000 420000 480000 Selling 90000 105000 120000 Total variable cost 990000 1155000 1320000 Fixed cost Manufacturing 143000 143000 143000 Administrative 71000 71000 71000 Total fixed cost 214000 214000 214000 Total Cost 1204000 1369000 1534000

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