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# 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.

#### Solution Preview

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 . . . . . . . . . . ...

#### Solution Summary

This solution is comprised of a detailed explanation to complete the flexible budget at the 90,000-unit level of activity.

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