Melo manufacturing Company is planning to use a flexible budgeting system to plan and control its operations.
Question:
Melo manufacturing Company is planning to use a flexible budgeting system to plan and control its operations. Evergreen made the following cost estimates for budgeting purposes:
Budget Formula Per Unit
Sales Br.250
Variable Costs
* Manufacturing Br. 150
* Selling 30
* Administrative 20
Total Variable Costs Br. 200
Contribution Margin Br.50
Budget Formula Per Month
Fixed Costs
* Manufacturing Br. 300,000
* Selling and administrative 250,000
Total fixed costs Br. 550,000
Required:
a) Prepared a flexible budget for the next month using 20,000, 21,000, and 22,000 units as activity level. Evergreen Company's cost functions or flexible budget formulas are believed to be valid within the range of 20,000 to 22,000 units.
b) At what level of quantity dos the company breakeven?( use contribution margin)
c) At what level of revenue does the company breakeven? ( use contribution margin)
Horngrens Financial and Managerial Accounting
ISBN: 978-0133866292
5th edition
Authors: Tracie L. Nobles, Brenda L. Mattison, Ella Mae Matsumura