Question

Margie’s Creations manufactures ceramic figurines. In planning for the coming year, the budget committee is considering three different sales targets: 5,700 figurines, 6,800 figurines, and 7,900 figurines. Figurines sell for $38 each. The standard cost information for one figurine is as follows:

Direct materials		$6
Direct labor		$10
Variable overhead		$4
Variable operating costs		$2

Annual expected fixed overhead cost $4,280Annual expected fixed operating costs$38,600

Prepare a flexible budget for the three sales levels under consideration.

Cost of goods soldFixed costContribution marginNet incomeOperating costsRevenueVariable cost
Cost of goods soldFixed costContribution marginNet incomeOperating costsRevenueVariable cost
Cost of goods soldFixed costContribution marginNet incomeOperating costsRevenueVariable cost
Cost of goods soldFixed costContribution marginNet incomeOperating costsRevenueVariable cost
Cost of goods soldFixed costContribution marginNet incomeOperating costsRevenueVariable cost
Cost of goods soldFixed costContribution marginNet incomeOperating costsRevenueVariable cost
Cost of goods soldFixed costContribution marginNet incomeOperating costsRevenueVariable cost
Cost of goods soldFixed costContribution marginNet incomeOperating costsRevenueVariable cost
Cost of goods soldFixed costContribution marginNet incomeOperating costsRevenueVariable cost

Answer 1

Solution:

Particulars	Flexible Budget (Nos ofunits)
5700	6800	7900
Sales	$216,600.00	$258,400.00	$300,200.00
Variable costs:
Direct materials	$34,200.00	$40,800.00	$47,400.00
Direct labor	$57,000.00	$68,000.00	$79,000.00
Variable overhead	$22,800.00	$27,200.00	$31,600.00
Variable operating costs	$11,400.00	$13,600.00	$15,800.00
Total variable costs	$125,400.00	$149,600.00	$173,800.00
Contribution margin	$91,200.00	$108,800.00	$126,400.00
Fixed costs:
Fixed manufacturing overhead	$4,280.00	$4,280.00	$4,280.00
Fixed operating costs	$38,600.00	$38,600.00	$38,600.00
Total fixed costs	$42,880.00	$42,880.00	$42,880.00
Net income	$48,320.00	$65,920.00	$83,520.00