Question

Return to questi 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 108,000-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. 108,000 Units Sales Cost of goods sold Gross profit on sales Operating expenses ($90,000 fixed) Operating income Income taxes (30% of operating income) Net income (938.400) $ (938,400) & Answer is not complete. 70,000 80,000 Units Units $ 1.400.000 $ 1,600,000 840.000 960,000 $ 560,000 $ 640,000 370.000 410.000 $ 190.000 $ 230,000 57,000 69.000 IS 133,000 $ 161,000 $ (938,400) $ (938,400)

Answer 1

Variable Portion of Operating Expense = (Highest Activity Cost-Lowest Activity Cost)/(Highest Activity Unit-Lowest Activity Units)

= (410,000-370,000)/(80,000-70,000)

= $4 Per Unit

Selling Price Per Unit = 1,400,000/70,000 = $20 Per Unit

Cost of goods sold = 840,000/1,400,000 = 60%

Total Operating Expense at 108,000 Units = (108,000 x 4) + 90,000 = $522,000

Particulars Sales Cost of goods sold Gross Profit on sales Operating expenses ($90,000 Fixed) Operating income Income tax @30% Net Income Amount ($) 21,60,000 12,96,000 8,64,000 5,22,000 3,42,000 1,02,600 2,39,400