Refer to the information in the previous problem for Essex Fuel Pumps. Pleased with the initial budget,
Question:
Increase in plant maintenance $225,000
Increase in plant depreciation $125,000
Increase in plant administration $100,000
Increase in marketing administration $40,000
Increase in plant supervision $75,000
Required:
a. Assume that demand is likely to continue at the level of 150,000 pumps over the next several years and that unit variable costs stay the same as estimated in the previous problem. Prepare a revised budgeted income statement for 2009 after incorporating the additional fixed cost estimates.
b. What would budgeted income be if Claire decides not to incur the additional capacity costs but, rather, decides to produce the maximum number of fuel pumps (i.e., 125,000 fuel pumps) with existing capacity?
c. Is it more profitable for Essex to increase capacity to 150,000 units or decrease production to 125,000 units?
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Related Book For
Managerial accounting
ISBN: 978-0471467854
1st edition
Authors: ramji balakrishnan, k. s i varamakrishnan, Geoffrey b. sprin
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