The management of Budget Inc. is conducting an internal audit and preparing the operating budget based on wages and salaries. They are requesting the following:
1. At what point does payroll reach the break- even point with the service calls (Volume)?
The accounting department provided you with the following information:
- Technician wages: $24.00
- Manager's salary: $57,000
- Initially, the contribution margin (CM) ratio is 38%
2. Using your answers from above, what if:
Wages where increased by 2%
Manager's salary was increased by 5%
How many more service calls (Volume) would be needed to remain at a break even point?
3. Using your answers from above, what if:
Unit Revenue was increased by $5.-
Advertising expenses are increased by $15,000
Service calls (Volume) is increased by 27%
What would the Operating Income be?
The key to this problem is to solve for units and sales price ...
The key to this problem is to solve for units and sales price per unit. After that, the three analyses are possible (and you can't do it without doing that first). Click in cells to see computations. Instructional marks are on the attached worksheet template.
Competition Bikes Inc. Storyline: Budgets And Budget Planning
Prepare a summary report in which you do the following:
1. Discuss budgetary items that raise concern in the budget planning.
2. Evaluate the flexible budget and its variances.
a. Recommend corrective actions for areas of concern based on a variance analysis.
b. Discuss how the concept of management by exception could be applied to the variances.