Question

Outdoor Outfitters has created a flexible budget for the 70,000-unit and the 80,000-unit levels of activity shown as follows. Complete Outdoor Outfitters's flexible budget at the 106,000-unit level of activity. Assume that the cost of goods sold and variable operating expenses vary directly with sales and that income taxes remain at 30 percent of operating income.

Answer 1

	70,000 Units			80,000 Units			106000-units
Sales	$	1,400,000		$	1,600,000		2120000
Cost of goods sold	(	840,000)			(960,000)		(1272000)
Gross profit on sales	$	560,000			640,000		848000
Operating expenses ($90,000 fixed)		(370,000)			(410,000)		(514000)
Operating income	$	190,000		$	230,000		$334000
Income taxes (30% of operating income)		(57,000)		(	69,000)		(100200)
Net income	$	133,000		$	161,000		$233800