Preparing a Flexible Budget at the 90,000 Unit Level of Activity

Preparing a Flexible Budget

The flexible budget at the 70,000-unit and the 80,000-unit levels of activity is shown below.

70,000 Units 80,000 Units 90,000 Units
Sales . . . . . . . . . . . . . . $1,400,000 $1,600,000
Cost of goods sold . . . . . . . . . 840,000 960,000
Gross profit on sales . . . . . . . .560,000 640,000
Operating expenses ($90,000 fixed) . 370,000 410,000
Operating income . . . . . . . . . . 190,000 230,000
Income taxes(30% of operating income) 57,000 69,000
Net income . . . . . . . . . . . . . 133,000 161,000

Complete the flexible budget at the 90,000-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.