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C Chegg Study Guided ScxWileyPLUS c Secure | https:/ r.uni WileyPLUS Woygandi, Accounting Principles, 12 Accounting Principles I & II (BU 155 156) Home Read, Study&Practice; Gradebok ORION Downloadable eTextbook AssianmantOpen Assignment BACK ASSIGNMENT RESOURCES Exercise 24-7 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 80,000, 95,000, and 110,000 units. Variable costs $7 per unit 3 per unit s2 per unit Administrative Selling Fixed costs $137,000 $93,000 Administrative Prepare a flexible budget for each of the possible production levels: 80,000, 95,000, and 110,000 units. (List variable costs before fixed costs.) APPLIANCE POSSIBLE INC Flexibke Production Cost Budget All Rights Reserved. A Division of Version 4,24.2.4 - Type here to search 11/28/2017Explanation / Answer
Solution:
Part 1 --- Product Budget at various level
APPLIANCE POSSIBLE INC.
Flexible Production Cost Budget
Production Level
Possible Production Level (units)
80,000
95,000
110,000
Variable Costs:
Manufacturing
$560,000
$665,000
$770,000
Administrative
$240,000
$285,000
$330,000
Selling
$160,000
$190,000
$220,000
Total Variable Costs
$960,000
$1,140,000
$1,320,000
Fixed Costs:
Manufacturing
$137,000
$137,000
$137,000
Administrative
$83,000
$83,000
$83,000
Total Fixed Costs
$220,000
$220,000
$220,000
Total Costs
$1,180,000
$1,360,000
$1,540,000
Part 2 ---
Unit Selling Price = $16
Variable Cost per unit = $7 + 3 + 2 = $12 per unit
Unit Contribution Margin = Selling Price $16 – Variable Cost $12 = $4 per unit
Total Fixed Cost = $220,000
Number of units will have to sell to make a profit of $203,200 before taxes = (Total Fixed Cost + Desired Profit) / Contribution Margin per unit
= ($220,000 + $203,200) / $4
= 105,800 Units
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APPLIANCE POSSIBLE INC.
Flexible Production Cost Budget
Production Level
Possible Production Level (units)
80,000
95,000
110,000
Variable Costs:
Manufacturing
$560,000
$665,000
$770,000
Administrative
$240,000
$285,000
$330,000
Selling
$160,000
$190,000
$220,000
Total Variable Costs
$960,000
$1,140,000
$1,320,000
Fixed Costs:
Manufacturing
$137,000
$137,000
$137,000
Administrative
$83,000
$83,000
$83,000
Total Fixed Costs
$220,000
$220,000
$220,000
Total Costs
$1,180,000
$1,360,000
$1,540,000
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