Polyfield Manufacturing prepares their annual budgets at the beginning of the year along with a mid-year update in June for any changes in estimates or business conditions. When the budget was prepared for the year, management made the following estimates for the month of July assuming sales of 65,000 units which sell for $10 each.

Sales

$650,000

Cost of Goods Sold

$406,250

Gross Profit

$243,750

Operating Expenses

Selling expenses (variable)

$58,500

Selling expenses (fixed)

$35,000

Administrative expenses

$22,000

Income before tax

$128,250

Tax expense

$26,933

Net income

$101,318

You are working as Polyfield's cost accountant, and management comes to you in June with some news about the projections for July. They recently received a large unexpected order from one of their biggest customers. Instead of 65,000 units, management is expecting to sell 85,000 units in July. They would like to see what the budget will look like assuming 85,000 units are sold rather than 65,000. Management assumes that the tax rate will remain unchanged.

Part II Requirement:

Use the information above to provide a flexible budget for the month of July assuming 85,000 units will be sold. Assume that the company has existing capacity and will not incur any additional fixed costs.