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ToasToe Inc. (TI) is a manufacturer of heating elements for toaster ovens. To improve control over...

ToasToe Inc. (TI) is a manufacturer of heating elements for toaster ovens. To improve control over operations, the president wants to install a flexible budgeting system, rather than the single master budget being used at present. the following data are available for expected costs for production. The relevant range of production levels for fixed overhead costs is 75,000 to 170,000 units: Variable costs: Manufacturing = $6/unit Administrative = $3/unit Selling = $1/unit Fixed costs: Manufacturing = $100,000 Administrative = $80,000

Required: Prepare a flexible budget for each of the three sales levels of: 90,000, 100,000 and 110,000 units. Each heating unit is expected to sell for $12.

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Answer #1

Flexible budget

Sales unit 90000 100000 110000
Sales 1080000 1200000 1320000
Less: Variable cost
Manufacturing cost 540000 600000 660000
Administrative cost 270000 300000 330000
Selling cost 90000 100000 110000
Total Variable cost 900000 1000000 1100000
Contribution margin 180000 200000 220000
Fixed cost
Manufacturing cost 100000 100000 100000
Administrative cost 80000 80000 80000
Total fixed cost 180000 180000 180000
Net income 0 20000 40000
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