Question

Question 13. The following information is from BYE-BYE Industries master budget for the 2016:

Number of units	25,000
Sales revenue	$854,000
Direct materials	163,000
Direct labor	105,000
Variable factory overhead	145,000
Fixed factory overhead	84,000
Variable selling and administrative expenses	55,000
Fixed selling and administrative expenses	18,000

a. calculates per unit amount at 25,000 units.

Number of units	25,000	Per unit amounts
Sales revenue
Direct materials
Direct labor
Variable factory overhead
Variable selling and administrative expenses

	24,000 units	25,000 units	28,000 units
Sales revenue
Direct materials
Direct labor
Variable factory overhead
Variable selling and administrative expenses
Contribution margin
Fixed factory overhead
Fixed selling and administrative expenses
Operating income

b. Prepare flexible budgets for the production and sale of 24,000, 25,000 and 28,000 units, respectively in upcoming years.

Answer 1

Requirement a

Number of units	25,000	Per unit amounts
Sales revenue		$ 34.16
Direct materials		$ 6.52
Direct labor		$ 4.20
Variable factory overhead		$ 5.80
Variable selling and administrative expenses		$ 2.20

Requirement b

Flexible Budget
	24,000 units	25,000 units	28,000 units
Sales revenue	$819,840.00	$854,000.00	$956,480.00
Direct materials	$156,480.00	$163,000.00	$182,560.00
Direct labor	$100,800.00	$105,000.00	$117,600.00
Variable factory overhead	$139,200.00	$145,000.00	$162,400.00
Variable selling and administrative expenses	$ 52,800.00	$ 55,000.00	$ 61,600.00
Contribution margin	$370,560.00	$386,000.00	$432,320.00
Fixed factory overhead	$ 84,000.00	$ 84,000.00	$ 84,000.00
Fixed selling and administrative expenses	$ 18,000.00	$ 18,000.00	$ 18,000.00
Operating income	$268,560.00	$284,000.00	$330,320.00

Working

Flexible Budget
	24,000 units	25,000 units	28,000 units
Sales revenue	=24000*34.16	=25000*34.16	=28000*34.16
Direct materials	=24000*6.52	=25000*6.52	=28000*6.52
Direct labor	=24000*4.2	=25000*4.2	=28000*4.2
Variable factory overhead	=24000*5.8	=25000*5.8	=28000*5.8
Variable selling and administrative expenses	=24000*2.2	=25000*2.2	=28000*2.2
Fixed factory overhead	84000	84000	84000
Fixed selling and administrative expenses	18000	18000	18000