Question

Crane 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 86,000, 99,000, and 112,000 units. Variable costs     Manufacturing $7 per unit     Administrative $4 per unit     Selling $2 per unit Fixed costs     Manufacturing $139,000     Administrative $72,000

Prepare a flexible budget for each of the possible production levels: 86,000, 99,000, and 112,000 units. (List variable costs before fixed costs.) CRANE INC. Flexible Production Cost Budget Activity LevelSellingTotal CostsFixed CostsVariable CostsTotal Fixed CostsManufacturingAdministrativeTotal Variable CostsProduction Levels     Selling    Activity Level    Administrative    Variable Costs    Fixed Costs    Total Variable Costs    Total Costs    Manufacturing    Total Fixed Costs    Production Levels     Total Fixed CostsTotal CostsManufacturingProduction LevelsAdministrativeSellingTotal Variable CostsVariable CostsActivity LevelFixed Costs     Selling    Fixed Costs    Manufacturing    Total Costs    Total Fixed Costs    Total Variable Costs    Production Levels    Administrative    Variable Costs    Activity Level     $ $ $     Total Fixed Costs    Total Costs    Production Levels    Administrative    Total Variable Costs    Variable Costs    Fixed Costs    Activity Level    Selling    Manufacturing         Variable Costs    Total Fixed Costs    Selling    Activity Level    Total Costs    Administrative    Production Levels    Fixed Costs    Total Variable Costs    Manufacturing     Total CostsFixed CostsAdministrativeSellingActivity LevelTotal Fixed CostsManufacturingVariable CostsTotal Variable CostsProduction Levels AdministrativeManufacturingFixed CostsProduction LevelsTotal CostsTotal Variable CostsTotal Fixed CostsSellingVariable CostsActivity Level     Selling    Fixed Costs    Manufacturing    Administrative    Production Levels    Total Fixed Costs    Total Variable Costs    Total Costs    Activity Level    Variable Costs         Fixed Costs    Total Fixed Costs    Total Costs    Total Variable Costs    Variable Costs    Activity Level    Administrative    Manufacturing    Production Levels    Selling     AdministrativeTotal Variable CostsFixed CostsManufacturingTotal Fixed CostsVariable CostsActivity LevelProduction LevelsSellingTotal Costs Total CostsTotal Fixed CostsManufacturingSellingFixed CostsAdministrativeProduction LevelsTotal Variable CostsVariable CostsActivity Level $ $ $ LINK TO TEXT

If AP sells the toaster ovens for $17 each, how many units will it have to sell to make a profit of $236,200 before taxes? Units to be sold

Answer 1

· Requirement asked

	Activity Level:
A	Finished Units	86,000	99,000	112,000
	Variable costs:
B = A x $7	Manufacturing	$602,000	$693,000	$784,000
C = A x $4	Administrative	$344,000	$396,000	$448,000
D = A x $2	Selling	$172,000	$198,000	$224,000
E = B+C+D	Total variable costs	$1,118,000	$1,287,000	$1,456,000
	Fixed costs:
F	Manufacturing	$139,000	$139,000	$139,000
G	Administrative	$72,000	$72,000	$72,000
H = F+G	Total Fixed costs	$211,000	$211,000	$211,000
I = E+H	Total costs	$1,329,000	$1,498,000	$1,667,000

A	Profit required	$236,200
B	Total Fixed costs	$211,000
C = A+B	Total contribution margin required	$447,200
D = 17 - 7 - 4 - 2	Unit contribution margin	4
E = C/D	Units to be sold	111800	Answer