Question

Scenario:
Oak Grove, Inc., reports the following information concerning operations for the most recent month. There are no inventories.
	Actual (based on actual of 1080 units)	Master Budget (based on budgeted 1,200 units)
Sales revenue	$176,640	$192,000
Less manufacturing costs
Direct labor	27,264	28,800
Materials	23,040	26,880
Variable overhead	15,744	19,200
Marketing	10,076	11,520
Administrative	9,600	9,600
Total variable costs	$85,824	$96,000
Contribution margin	$90,816	$96,000
Fixed costs
Manufacturing	9,380	9,600
Marketing	19,968	19,200
Administrative	19,122	19,200
Total fixed costs	$ 48,420	$48,000
Operating profits	$ 42,396	$48,000
REQUIRED
Prepare a flexible budget for Oak Grove, Inc.

Answer 1

	Flexible Budget (based on budgeted 1080 units)
Sales revenue	$192,000/1200*1080 = $172,800
Less manufacturing costs
Direct labor	28,800/1200*1080 = $25920
Materials	26,880/1200*1080 = $24192
Variable overhead	19,200/1200*1080 = $17280
Marketing	11,520/1200*1080 = $10368
Administrative	9,600/1200*1080 = $8640
Total variable costs	$86,400
Contribution margin	$86,400
Fixed costs
Manufacturing	9,600
Marketing	19,200
Administrative	19,200
Total fixed costs	$48,000
Operating profits	$38,400