Question

Appliance Possible Inc. (AP) is a manufacturer of toaster ovens. To improve control over operations, the president of AP wants to begin using a flexible budgeting system, rather than use only the current master budget. The following data are available for AP’s expected costs at production levels of 80,000, 95,000, and 110,000 units.

Variable costs
Manufacturing		$6 per unit
Administrative		$3 per unit
Selling		$2 per unit
Fixed costs
Manufacturing		$139,000
Administrative		$79,000

Prepare a flexible budget for each of the possible production levels: 80,000, 95,000, and 110,000 units. (List variable costs before fixed costs.)

APPLIANCE POSSIBLE INC. Flexible Production Cost Budget
Total Fixed CostsFixed CostsProduction LevelsAdministrativeManufacturingSellingTotal CostsTotal Variable CostsVariable CostsActivity Level
AdministrativeTotal Variable CostsActivity LevelVariable CostsFixed CostsManufacturingProduction LevelsTotal Fixed CostsSellingTotal Costs
Total Fixed CostsSellingFixed CostsActivity LevelTotal Variable CostsProduction LevelsTotal CostsVariable CostsAdministrativeManufacturing
Total Fixed CostsActivity LevelAdministrativeTotal Variable CostsFixed CostsSellingProduction LevelsVariable CostsManufacturingTotal Costs		$		$		$
SellingTotal CostsVariable CostsFixed CostsProduction LevelsManufacturingTotal Fixed CostsTotal Variable CostsActivity LevelAdministrative
Total Variable CostsVariable CostsProduction LevelsTotal Fixed CostsManufacturingActivity LevelAdministrativeSellingFixed CostsTotal Costs
ManufacturingSellingTotal Fixed CostsProduction LevelsActivity LevelTotal Variable CostsTotal CostsVariable CostsAdministrativeFixed Costs
Total Fixed CostsManufacturingSellingAdministrativeTotal Variable CostsVariable CostsActivity LevelProduction LevelsFixed CostsTotal Costs
AdministrativeFixed CostsVariable CostsActivity LevelTotal CostsManufacturingProduction LevelsTotal Fixed CostsTotal Variable CostsSelling
Activity LevelTotal CostsTotal Fixed CostsVariable CostsAdministrativeFixed CostsManufacturingTotal Variable CostsProduction LevelsSelling
Production LevelsAdministrativeSellingTotal Fixed CostsTotal Variable CostsTotal CostsVariable CostsFixed CostsActivity LevelManufacturing
Variable CostsTotal Fixed CostsTotal CostsActivity LevelFixed CostsManufacturingTotal Variable CostsProduction LevelsAdministrativeSelling		$		$		$

Answer 1

APPLIANCE POSSIBLE INC. Flexible Production Cost Budget
Activity level
Production levels	80,000	95,000	110,000
Variable costs:
Manufacturing	$480,000 (80,000*$6)	$570,000 (95,000*$6)	$660,000 (110,000*$6)
Administrative	240,000 (80,000*$3)	285,000 (95,000*$3)	330,000 (110,000*$3)
Selling	160,000 (80,000*$2)	190,000 (95,000*$2)	220,000 (110,000*$2)
Total variable costs	880,000	1,045,000	1,210,000
Fixed costs:
Manufacturing	139,000	139,000	139,000
Administrative	79,000	79,000	79,000
Total fixed costs	218,000	218,000	218,000
Total costs	$1,098,000	$1,263,000	$1,428,000