Question

Vaughn Sports sells volleyball kits that it purchases from a sports equipment distributor. The following static budget based on sales of 2,000 kits was prepared for the year. Fixed operating expenses account for 80% of total operating expenses at this level of sales. Sales Revenue $ 100,280 Cost of goods sold (all variable) 60,000 Gross margin 40,280 Operating expenses 35,170 Operating income $ 5,110 Prepare a flexible budget based on sales of 1,467, 2,570, and 3,840 units.

Answer 1

Working
	Amount	÷ Units	Per unit	Fixed - 80%
Sales Revenue	$100,280	2000	50.14
Cost of goods sold (all variable)	60,000	2000	30.00
Gross margin	40,280	2000	20.14
Operating expenses - 80% Fixed	35,170	2000	3.517	28136
Operating income	$5,110
Flexible Budget
Units	1467	2570	3840
Sales Revenue ( No of units x $50.14)	$ 73,555.38	$ 128,859.80	$ 192,537.60
Cost of goods sold (No. of units x $30)	44,010.00	77,100.00	115,200.00
Gross Margin	29,545.38	51,759.80	77,337.60
Operating Expenses:
Variable (No. of units x $3.517)	5,159.44	9,038.69	13,505.28
Fixed Expenses	28,136.00	28,136.00	28,136.00
Operating Income	(3,750.06)	14,585.11	35,696.32