Question

Mauricio's static budget was calculated as follows: Sales (30,000 units) $600,000 Manufacturing costs (1/2 fixed) $120,000...

Mauricio's static budget was calculated as follows:

Sales (30,000 units) $600,000

Manufacturing costs (1/2 fixed) $120,000

Other operating costs ( all fixed) $150,000

If the company actually sold 15,000 units the operating income when using a flexible budget would be

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Answer #1

Answer-----------Operating income will be $60,000

Working

Flexible budget for 15000 Units
Sales (600000/30000 x 15000) $ 300,000.00
Variable Cost
Variable manufacturing cost (60000/30000 x 15000) $    30,000.00
Total variable cost $    30,000.00
Contribution margin $ 270,000.00
Fixed Costs:
Fixed manufacturing expenses $    60,000.00
Fixed operating cost $ 150,000.00
Total Fixed Cost $ 210,000.00
Net Income $    60,000.00

Fixed manufacturing cost and operating cost will remain same if units sold are decreased or increased. Variable cost on the other hand will decrease if units sold decrease

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