Question

The master budget at Western Company last period called for sales of 235,000 units at $10.00 each. The costs were estimated to be $3.00 variable per unit and $220,000 fixed. During the period, actual production and actual sales were 240,000 units. The selling price was $10.10 per unit. Variable costs were $3.75 per unit. Actual fixed costs were $220,000. Required: Prepare a flexible budget for Western. WESTERN COMPANY Flexible Budget Sales revenue Variable costs Contribution margin Fixed costs Operating profit $ 0

Answer 1

Ans.	Western   Company
	Flexible Budget
	Sales revenue	$2,400,000
	Variable costs	$720,000
	Contribution margin	$1,680,000
	Fixed costs	$220,000
	Operating profit	$1,460,000
	*Working notes:
	*Flexible budget is prepared on the basis of actual units.
	*Fixed expenses in flexible budget remain same as master budget.
	Flexible budgeted sales = Actual units sold * Master budgeted selling price
		240,000 * $10
		$2,400,000
	Flexible variable cost = Actual units sold * Master budgeted variable cost per unit
		240,000 * $3
		$720,000