PA12.
LO 7.4Before the year began, the following static budget was developed for the estimated sales of 100,000. Sales are sluggish and management needs to revise its budget. Use this information to prepare a flexible budget for 80,000 and 90,000 units of sales.

[tex]\left[\begin{array}{cccc}$unit sale&100000&90000&80000\\$sales revenue&3500000&3150000&2800000\\$COGS&&&\\$Material&900000&810000&720000\\$Labor&1000000&900000&800000\\$VMO&250000&225000&200000\\$FMO&80000&80000&80000\\$total&2230000&2015000&1800000\\$gross profit&1270000&1135000&1000000\\$V S and A&100000&90000&80000\\$F S and A&950000&950000&950000\\$operating income&220000&95000&-30000\\$tax expense&66000&28500&\\$net income&154000&66500&-30000\\\end{array}\right][/tex]

Explanation:

We will cross-multiply the variables concept like sales revenues materials, labor and other

I.G

sales revenues for 90,000:

3,500,000 / 100,000 x 90,000 = 3,150,000

for 80,000:

3,500,000 / 100,000 x 80,000 = 2,800,000

The fixed will remain at the same value between the relevant range so we do not change them.

For the tax expense we will have to check which is the rate

for 220,000 operating income the tax expense is 66,000

we can solve for rate: 66,000/220,000 = 0.3 = 30%

Now we will determinate the tax expense with that rate.

NOTE attached missing information

PA12. LO 7.4Before the year began, the following static budget was developed for the estimated sales of 100,000. Sales are sluggish and management needs to revise its budget. Use this information to prepare a flexible budget for 80,000 and 90,000 units of sales.

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PA12.
LO 7.4Before the year began, the following static budget was developed for the estimated sales of 100,000. Sales are sluggish and management needs to revise its budget. Use this information to prepare a flexible budget for 80,000 and 90,000 units of sales.