Question
In: Accounting
How to prepare a flexible budget for different levels of activity
How to prepare a flexible budget for different levels of activity
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Expert Solution
Answer:- A flexible budget is a budget that adjusts or flexes for changes in the volume of activity. This budget is also known as variable budget.A flexible budget is usually designed to predict effects of changes in volume and how that affects revenues and expenses. In order to accurately predict the changes in costs, management has to identify the fixed costs and the variable costs. Fixed costs will be constant within relevant range of operations where the variable costs will continue to increase as production increases.
Variable costs are usually shown in the budget as either a percentage of total revenue or a constant rate per unit produced. In a flexible budget, fixed costs stay constant whereas variable and semi-variable costs change according to a standard predetermined at the beginning of an accounting period.
A typical budget is usually formatted with five columns. The first column lists the sales and expense categories for the company. The second column lists the variable costs as a percentage or unit rate and the total fixed costs. The next three columns list different levels of output and the changes in variable costs based on the increased or decreased sales.
ekkarill92 answered 10 months agoRelated Solutions
A flexible budget seeks to overcome the problem of differing levels of activity between budget and...
A flexible budget seeks to
overcome the problem of differing levels of activity between budget
and actual output volumes. A new ‘flexed’ budget is prepared at the
actual output level to be used for variance analysis purposes. A
simple example could be the budget given to you to grade test
papers of 30 minutes per paper for 10 students = 300 minutes. If
only 8 students sit the test your budget will be flexed to 240
minutes (8 x 30).)...
How do you prepare a flexible budget?
How do you prepare a flexible budget?
why is it important to be able to adjust the budget to different activity levels as...
why
is it important to be able to adjust the budget to different
activity levels as is the practice and flexible budgeting?
Outdoor Outfitters has created a flexible budget for the 70,000-unit and the 80,000-unit levels of activity...
Outdoor Outfitters has created a flexible budget for the
70,000-unit and the 80,000-unit levels of activity shown as
follows. Complete Outdoor Outfitters's flexible budget at the
106,000-unit level of activity. Assume that the cost of goods sold
and variable operating expenses vary directly with sales and that
income taxes remain at 30 percent of operating income.
70,000 Units 80,000 Units 106,000 Units
Sales $1,400,000 $1,600,000 ??
Goods sold $840,000 $960,000 ??
profit on sales $560,000 $640,000 ??
Operating expenses ($90,000...
Outdoor Outfitters has created a flexible budget for the 70,000-unit and the 80,000-unit levels of activity...
Outdoor Outfitters has created a flexible budget for the
70,000-unit and the 80,000-unit levels of activity shown as
follows. Complete Outdoor Outfitters's flexible budget at the
105,000-unit level of activity. Assume that the cost of goods sold
and variable operating expenses vary directly with sales and that
income taxes remain at 30 percent of operating income.
70,000 Units
80,000 Units
105,000-units
Sales
$
1,400,000
$
1,600,000
Cost of goods sold
840,000
960,000
Gross profit on sales
$
560,000
640,000...
Use the following data to prepare a flexible budget for possible sales/production levels of 5,000, 5,500,...
Use the following data to prepare a flexible budget for possible
sales/production levels of 5,000, 5,500, and 6,000 units. Make sure
to show the contribution margin at each activity level.
Sales
price $11.00
per unit
Variable
costs:
Manufacturing $6.00
per unit
Administrative $1.50
per unit
Selling
$.50 per unit
Fixed
costs:
Manufacturing
$14,000
Administrative
$5,000
Assume no safety inventory Prepare a flexible income statement budget for three production levels of Crow...
Assume no safety inventory
Prepare a flexible income statement budget for three production
levels of Crow Co.
Production: 5,000 units; 8,000 units,
10,000 units.
Price per unit: $45
Costs of Goods Sold:
Direct Material: 11% of total
revenues, Direct Labor: 12% of total revenues, Factory Overhead: 5%
of total revenues. Fixed Costs = $8,000
Expenses:
Administrative Expenses: 5% of Gross
Profit, Selling Expenses: 10% of Gross Profit. Tax Expense: 20% of
operating profit
Crow Co. Flexible Income
Statement, Dec/31/20XY
Production...
Flexible Budget for Varying Levels of Activity Nashler Company has the following budgeted variable costs per...
Flexible Budget for Varying Levels of Activity
Nashler Company has the following budgeted variable costs per
unit produced:
Direct materials $7.20
Direct labor 1.54
Variable overhead:
Supplies 0.23
Maintenance 0.19
Power 0.18
Budgeted fixed overhead costs per month include supervision of
$98,000, depreciation of $76,000, and other overhead of
$245,000.
Required:
1. Prepare a flexible budget for all costs of production for
the following levels of production: 160,000 units, 170,000 units,
and 175,000 units. Round your answers to the nearest...
Flexible Budget for Varying Levels of Activity Nashler Company has the following budgeted variable costs per...
Flexible Budget for Varying Levels of Activity
Nashler Company has the following budgeted variable costs per
unit produced:
Direct materials
$7.10
Direct labor
1.54
Variable overhead:
Supplies
0.23
Maintenance
0.19
Power
0.17
Budgeted fixed overhead costs per month include supervision of
$98,000, depreciation of $77,000, and other overhead of
$242,000.
Required:
1. Prepare a flexible budget for all costs of
production for the following levels of production: 160,000 units,
170,000 units, and 175,000 units. Round your answers to the nearest...
Flexible Budget for Varying Levels of Activity Nashler Company has the following budgeted variable costs per...
Flexible Budget for Varying Levels of Activity
Nashler Company has the following budgeted variable costs per
unit produced:
Direct materials
$7.10
Direct labor
1.54
Variable overhead:
Supplies
0.23
Maintenance
0.19
Power
0.17
Budgeted fixed overhead costs per month include supervision of
$98,000, depreciation of $77,000, and other overhead of
$242,000.
Required:
1. Prepare a flexible budget for all costs of
production for the following levels of production: 160,000 units,
170,000 units, and 175,000 units. Round your answers to the nearest...
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