Using the attached data and format from the budget tab create a flex-budget for the month of July using 3 or 4 different planned units of sales. Base your assumptions on several different factors:
* The trends in actual sales shown at the bottom of the Budget tab
* The activity levels needed to turn a profit since the June actual figures resulted in a loss, and
* The likelihood of achieving different levels of unit sales
See attached for your flexible budget computations and discussion.
Given that June was a loss, I decided to use the June actual sales prices and cost of materials and labor to make the July flexible budgets more realistic. I also started the flex budget at June actual activity levels and then increased mid-grade by 1% and high end by 2% increments. That is the budget percent increases for each product. I updated only one ...
Your tutorial created 25 different flexible budgets for July. This gives the student a sensitivity analysis and shows when the sales "toggle" to break even from June's loss levels. June's actual prices, actual sales quantity and actual materials and labor costs were used instead of budget to give a more realistic forecast for July. An estimate is given when the firm might breakeven given the current growth rates in sales of the two products. The solution provides the flexible budget using the format given and also in a contribution margin format for comparison and study.