Question

Brodrick Company expects to produce 21,600 units for the year ending December 31. A flexible budget for 21,600 units of production reflects sales of $626,400; variable costs of $64,800; and fixed costs of $141,000.

QS 08-3 Flexible budget LO P1

If the company instead expects to produce and sell 27,500 units for the year, calculate the expected level of income from operations.
  

Answer 1

information given as per flexible budget for the year ending decmber 31 :

production ans sales = 21600 units

sales = $626400

variable costs =$64,800

fixed costs = $141,000

calculation of variable cost per unit and selling price per unit :

variable cost per unit = variable costs/no. of units sales = $64800/21600 = $3

selling price per unit = sales/no. of units sales = $626400/21600 = $29

calculation of expected level of income from operation to produce and sell 27,500 units for the year :

particular	amounts
sales (27500 x $29)	$797500
less : costs
variable costs (27500 x $3)	-82500
fixed costs	-141000
income from operation	$574000

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