Question

The following information is available for DEF Company pertaining to its budgeted and actual activities for the period.

Item	Budgeted Activity (10,000 units)	Actual Activity (12,000 units)
Sale Price	$10.00 per unit	$9.75 per unit
Variable Costs (per unit)
Direct Materials	$2.00 per unit	$1.89 per unit
Direct Labor	$3.00 per unit	$3.05 per unit
Factory Supplies	$0.25 per unit	$0.25 per unit
Utilities	$0.35 per unit	$0.33 per unit
Selling Costs	$0.50 per unit	$0.45 per unit
Fixed Costs (for the period)
Depreciation	$2,500	$3,000
Administrative Expenses	$15,000	$13,000
Property Taxes	$1,000	$1,000

Factory Supplies, Utilities, and Depreciation are considered to be overhead items.

The standard for each unit for direct materials is to use 10 ounces at a cost of $0.20 per ounce. The actual production used 9 ounces at a cost of $0.21 per ounce.

The standard for each unit for direct labor is to use 0.20 hours at $15.00 per hour. The actual production used 0.20 hours at $15.25 per hour.

Prepare a flexible budget showing expected sales, variable costs, fixed costs, and net income assuming 10,000 units and 15,000 units of production. Ignore income taxes.

Answer 1

		Activity Level
	Particulars	10000	15000		10000	15000
	Estimated Sales(A)	100000	150000		10000*10	15000*10
	Variable Costs:
	Direct Material	20000	30000		2.00	2.00	PU Cost *Units Level
	Direct Labor	30000	45000		3.00	3.00
	Factory Supplies	2500	3750		0.25	0.25
	Utilities	3500	5250		0.35	0.35
	Selling Costs	5000	7500		0.50	0.50
	Total Variable Costs(B)	61000	91500
	Fixed Costs:
	Depreciation	2500	2500
	Admiistrative Cost	15000	15000
	Property Taxes	1000	1000
	Total Fixed Costs©	18500	18500
	Net Operating Income(A-B-C)	20500	40000