Exercise 22-7 (Part Level Submission) (a) Prepare a flexible budget for each of

Question

Exercise 22-7 (Part Level Submission)

(a)

Prepare a flexible budget for each of the possible production levels: 82,000, 92,000, and 102,000 units. (List variable costs before fixed costs.)

APPLIANCE POSSIBLE INC.
Flexible Production Cost Budget

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 82,000, 92,000, and 102,000 units.
Variable costs     Manufacturing $6 per unit     Administrative $3 per unit     Selling $2 per unit Fixed costs     Manufacturing $144,000     Administrative $76,000

Explanation / Answer

APPLIANCE POSSIBLE INC.

Flexible Production Cost Budget

Production Levels (units) 82,000 units 92,000 units 102,000 units Variable Costs : Manufacturing ($6 per unit) $492,000 $552,000 $612,000 Administrative ($3 per unit) $246,000 $276,000 $306,000 Selling ($2 per unit) $164,000 $184,000 $204,000 Total Variable Costs $902,000 $1,012,000 $1,122,000 Fixed Costs Manufacturing $144,000 $144,000 $144,000 Administrative $76,000 $76,000 $76,000 Total Fixed Costs $220,000 $220,000 $220,000 Total Costs $1,122,000 1,232,000 $1,342,000

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