Question

Managerial ACC

Parkland, Inc. sells a unit of its product for $16.00,resulting in a contribution margin of $8.50 per unit. Fixed costs are budgeted at $220,000 per quarter for volumes up to 30,000 units and $250,000 for volumes exceeding 30,000 units.

Prepare the flexible budget for the next quarter for volume levels of 25,000,30,000, nd 35,000 units.

Units	25,000	30,000	35,000
Sales Revenue
Vriable expenses
fixed expenses
Total expenses
Operating income

Answer 1

Units	25,000 units	30,000 units	35,000 units
Sales Revenue	25000*$16 = $400000	30000*$16 =$480000	35000*$16 =$560000
Variable expenses	25000 * $7.5 =187500	30000 * $7.5 =225000	35000*$7.5 =$262500
fixed expenses	$220000	$220000	$250000
Total expenses	407500	445000	512500
Operating income (sales - total expenses)	($7500)	$35000	$47500

Note:- variable cost = sales per unit - contribution margin per unit

   = $16 - $8.5

   = $7.5