Question

The following is a summarized master budget that Tu Company prepared for JanuarY:

Sales 9000 units

Sales Revenue $450000

Less variable costs:

Manufacturing $270000

Selling and admin $18000

Contribution Margin $162000

Less fixed costs:

Manufacturing $72000

Selling and admin $27000

Operating income $63000

Actual results for January were as follows:

Units produced and sold 8500 units

Selling price per unit $55

Variable costs per unit:

Manufacturing $32

Selling and admin $1.50

Total fixed cost $99

What was the flexible budget operating income (loss) for the company for January?

a) 83750

b) 63000

c) 59500

d) 54000

Answer 1

Correct Answer will be d) 54000

Detail Working for your refrence,

First we will calculate per Unit Budgeted rate as follows:-

Budgeted Operating Income
	Amount	Amount	Per Unit Rate
Estimated Sales Unit			9000
Sales Revenue		$450,000.00	$50.00
Less: Variable costs
Manufacturing	$270,000.00		$30.00
Selling and Administrative	$18,000.00		$2.00
Total variable costs		$288,000.00	$32.00
Contribution margin		$162,000.00	$18.00
Less: Fixed costs
Manufacturing	$72,000.00
Selling and Administrative	$27,000.00	$99,000.00
Operating income		$63,000.00

then will be applied per Unit Budgeted rate on actual Quantity sold to calculate flexible operating Income as follows:-

Flexible Operating Income
	Per Unit	Amount	Amount
Actual Sales Unit		8500
Sales Revenue	$50.00		$425,000.00
Less: Variable costs
Manufacturing	$30.00	$255,000.00
Selling and Administrative	$2.00	$17,000.00
Total variable costs			$272,000.00
Contribution margin			$153,000.00
Less: Fixed costs
Manufacturing		$72,000.00
Selling and Administrative		$27,000.00	$99,000.00
Operating income			$54,000.00

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