Balmer Corporation's master budget for the year is presented below: Sales (50,000 units) $ 1,600,000 Cost of
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Question:
Balmer Corporation's master budget for the year is presented below:
| | | | | | |
Sales (50,000 units) | | | | $ | 1,600,000 | |
Cost of goods sold: | $ | 150,000 | | | | |
Direct materials | | 450,000 | | | | |
Direct labor | | 240,000 | | | 840,000 | |
Overhead (Variable overhead applied at 40% of direct labor cost) | | | | $ | 760,000 | |
Gross profit | | | | | | |
Selling expenses: | | | | | | |
Sales commissions (all variable) | $ | 160,000 | | | | |
Rent (all fixed) | | 40,000 | | | | |
Insurance (all fixed) | | 30,000 | | | | |
General expenses: | | | | | | |
Salaries (all fixed) | | 92,000 | | | | |
Rent (all fixed) | | 77,000 | | | | |
Depreciation (all fixed) | | 51,000 | | | 450,000 | |
Operating income | | | | $ | 310,000 | |
During the period, the company manufactured and sold 42,000 units.
Required:
1. Prepare a flexible budget (FB) for the actual output level achieved during the period; state each item at nearest whole dollar.
2. What is the definition of a FB? For what managerial purpose is a FB useful? Be specific about the types of information (and variances) that management can generate, at the end of an accounting period, given a flexible budget and its master (static) budget.
Related Book For
Cost Management A Strategic Emphasis
ISBN: 978-0078025532
6th edition
Authors: Edward Blocher, David Stout, Paul Juras, Gary Cokins
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