Question

Before the year began, the following static budget was developed for the estimated sales of 100,000. Sales are sluggish and management needs to revise its budget. Use this information to prepare a flexible budget for 80,000 and 90,000 units of sales. Flexible Budget 100,000 80,000 90,000 Sales $3,460,000 Cost of Goods Sold Direct Material $800,000 Direct Labor 1,000,000 Variable Manufacturing Overhead 230,000 Fixed Manufacturing Overhead 70,000 Cost of Goods Sold $2,100,000 Gross Profit $1,360,000 Variable Sales and Administrative Expenses 200,000 Fixed Sales and Administrative Expenses 960,000 Income Before Taxes $200,000 $ Taxes 60,000 Net Income/Loss $140,000

b. estimated sales are:

Oct.		$131,976
Nov.		195,704
Dec.		249,267
Jan		124,288
Feb.		124,295
Mar.		124,358

What are the balances in accounts receivable for January, February, and March if 65% of sales is collected in the month of sale, 25% is collected the month after the sale, and 10% is second month after the sale? Round your answers to two decimal places.

		Ending Balance
January
February
March

c. Cold X, Inc. uses the following information when preparing their flexible budget: direct materials of $2 per unit, direct labor of $2 per unit, and manufacturing overhead of $1 per unit. Fixed costs are $39,000. What would be the budgeted amounts for 21,000 and 25,000 units?

		Budgeted Amounts
21,000 units
25,000 units

Answer 1

Requirement a
Flexible Budget
	100000	80000	90000
Sales	3460000	2768000	3114000
Cost of Goods Sold
Direct Material	800000	640000	720000
Direct Labor	1000000	800000	900000
Variable manufacturing overhead	230000	184000	207000
Fixed manufacturing overhead	70000	70000	70000
Cost of Goods Sold	2100000	1694000	1897000
Gross Profit	1360000	1074000	1217000
Variable sales and Administrative Expenses	200000	160000	180000
Fixed sales and Administrative Expenses	960000	960000	960000
Income Before Taxes	200000	-46000	77000
Taxes	60000	-13800	23100
Net Income/Loss	140000	-59800	53900
Requirement b.
	January	February	March
December Sales	24926.70
	(249267*10%)
January Sales	43500.80	12428.80
	(124288*35%)	(124288*10%)
February Sales		43503.25	12429.50
		(124295*35%)	(124295*10%)
March Sales			43525.30
			(124358*35%)
Ending accounts receivable balance	68427.50	55932.05	55954.80
Requirement c.
Units	21000	25000
Direct Material	42000	50000
Direct Labor	42000	50000
Variable manufacturing overhead	21000	25000
Fixed costs	39000	39000
Total Budgeted costs	144000	164000