Exercise 22-7 KITCHEN HELP INC. Flexible Production Cost Budget LINK TO TEXT LIN

Question

Exercise 22-7

KITCHEN HELP INC.
Flexible Production Cost Budget

LINK TO TEXT

LINK TO VIDEO

Exercise 22-7

Kitchen Help Inc. (KHI) is a manufacturer of toaster ovens. To improve control over operations, the president of KHI wants to begin using a flexible budgeting system, rather than use only the current master budget. The following data are available for KHI’s expected costs at production levels of 82,000, 93,000, and 104,000 units.
Variable costs     Manufacturing $6 per unit     Administrative $3 per unit     Selling $2 per unit Fixed costs     Manufacturing $140,000     Administrative $80,000

Explanation / Answer

Flexible budget :

2)contribution per unit = 16 - (6+ 3+2) = 5

Fixed cost = 220000

Units to sold = (Fixed cost +desired income)/ contribution

                   = (220000 +323500)/ 5

                       = 543500/5

                         = 108700 units

Units 82000 93000 104000 Variable cost Manufacturing   (6) 492000    [82000*6] 558000 624000 Administrative (3) 246000    [82000*3] 279000 312000 selling    (2) 164000    [82000*2] 186000 208000 Total variable cost 902000 1023000 1144000 Fixed cost Manufacturing 140000 140000 140000 Administrative 80000 80000 80000 Total fixed cost 220000 220000 220000 Total cost 1122000 1243000 1364000

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.