Appliance Possible Inc. (AP) is a manufacturer of toaster ovens. To improve cont

Question

Appliance Possible Inc. (AP) is a manufacturer of toaster ovens. To improve control over operations, the president of AP wants to begin using a flexible budgeting system, rather than use only the current master budget. The following data are available for AP’s expected costs at production levels of 80,000, 91,000, and 102,000 units.

Administrative

Prepare a flexible budget for each of the possible production levels: 80,000, 91,000, and 102,000 units

$76,000

Variable costs     Manufacturing $7 per unit     Administrative $3 per unit     Selling $2 per unit Fixed costs     Manufacturing $130,000

Administrative

Prepare a flexible budget for each of the possible production levels: 80,000, 91,000, and 102,000 units

$76,000

Explanation / Answer

Ans)

Production Levels 80,000 91,000 102,000 Variable costs: Manufacturing 560,000 637,000 714,000 Administrative 240,000 273,000 306,000 Selling 160,000 182,000 204,000 Total variable costs 960,000 1092,000 1224,000 Fixed costs Manufacturing 130,000 130,000 130,000 Administrative 76000 76000 76000 Total fixed costs 206,000 206,000 206,000 Total costs 1166000 1298000 1430,000

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