Tasteez is preparing their 2018 budget. They want to prepare a flexible budget f
ID: 2534000 • Letter: T
Question
Tasteez is preparing their 2018 budget. They want to prepare a flexible budget for use each month. They estimate sales/production will be between 1,500,000 and 2,000,000 boxes of frozen TV dinners per month. Monthly Budget Data for Question 1: Selling price per unit: Ingredient Costs Packaging Costs Salary and Wages Costs OT for production over 1,750,000 units Fringe Benefits Electricity Waste and Other Costs Rent Costs Insurance Costs Depreciation Costs $6.00 per box $2.00 per box $0.75 per box $300,000 per month $1.00 per box 50% of wages and OT $0.20 per box $0.15 per box $350,000 per montlh $50,000 per month $150,000 per month Question 1: Prepare a flexible budget in Excel for Tasteez a) b) c) d) Show the flexible budget based on 1,500,000 units (boxes) produced Show the flexible budget based on 2,000,000 units (boxes) produced Show the flexible budget cost formulas for Tasteez TV dinners. Explain the benefit of flexible budgets and when they should be usedExplanation / Answer
a)
Testeez Budget - 1,500,000 units
Particular
Amount
Sale
$ 90,00,000.00
Less Cost
Ingredients cost
$ 30,00,000.00
Packing Cost
$ 11,25,000.00
Salary and wages
$ 3,00,000.00
Over time
$ -
Fringe Benefits
$ -
Electricity
$ 3,00,000.00
Waste and other cost
$ 2,25,000.00
Rent Cost
$ 3,50,000.00
Insurance cost
$ 50,000.00
Depreciation Cost
$ 1,50,000.00
Total Cost
$ 55,00,000.00
Net Income
$ 35,00,000.00
b)
Testeez Budget - 1,500,000 units
Particular
Amount
Sale
$ 1,20,00,000.00
Less Cost
Ingredients cost
$ 40,00,000.00
Packing Cost
$ 15,00,000.00
Salary and wages
$ 3,00,000.00
Over time
$ 2,50,000.00
Fringe Benefits
$ 1,25,000.00
Electricity
$ 4,00,000.00
Waste and other cost
$ 3,00,000.00
Rent Cost
$ 3,50,000.00
Insurance cost
$ 50,000.00
Depreciation Cost
$ 1,50,000.00
Total Cost
$ 74,25,000.00
Net Income
$ 45,75,000.00
c)
Flexible Budget formula
Net Income = Sale - Total Cost
Sales
(Unit* unit selling Price)
Ingredients cost
units *2
Packing Cost
units *.75
Salary and wages
300000 per month
Over time
over time for unit produced above 1750000 units
Fringe Benefits
50% of Over time
Electricity
units*.2
Waste and other cost
units*.15
Rent Cost
Per month 350000
Insurance cost
Per month 50000
Depreciation Cost
Per month 150000
Total Cost
d)
Benefits
this is very easy method to calculate budgeted net income
The greatest advantage that a flexible budget has is its adaptability
Help to react to opportunities
Helps in adjusting cost and margin
When flexible budgets should be used
possible to segregate fixed and variable cost in the budget model
able to determine the extend to which all variable cost changes as activity changes
a)
Testeez Budget - 1,500,000 units
Particular
Amount
Sale
$ 90,00,000.00
Less Cost
Ingredients cost
$ 30,00,000.00
Packing Cost
$ 11,25,000.00
Salary and wages
$ 3,00,000.00
Over time
$ -
Fringe Benefits
$ -
Electricity
$ 3,00,000.00
Waste and other cost
$ 2,25,000.00
Rent Cost
$ 3,50,000.00
Insurance cost
$ 50,000.00
Depreciation Cost
$ 1,50,000.00
Total Cost
$ 55,00,000.00
Net Income
$ 35,00,000.00
b)
Testeez Budget - 1,500,000 units
Particular
Amount
Sale
$ 1,20,00,000.00
Less Cost
Ingredients cost
$ 40,00,000.00
Packing Cost
$ 15,00,000.00
Salary and wages
$ 3,00,000.00
Over time
$ 2,50,000.00
Fringe Benefits
$ 1,25,000.00
Electricity
$ 4,00,000.00
Waste and other cost
$ 3,00,000.00
Rent Cost
$ 3,50,000.00
Insurance cost
$ 50,000.00
Depreciation Cost
$ 1,50,000.00
Total Cost
$ 74,25,000.00
Net Income
$ 45,75,000.00
c)
Flexible Budget formula
Net Income = Sale - Total Cost
Sales
(Unit* unit selling Price)
Ingredients cost
units *2
Packing Cost
units *.75
Salary and wages
300000 per month
Over time
over time for unit produced above 1750000 units
Fringe Benefits
50% of Over time
Electricity
units*.2
Waste and other cost
units*.15
Rent Cost
Per month 350000
Insurance cost
Per month 50000
Depreciation Cost
Per month 150000
Total Cost
d)
Benefits
this is very easy method to calculate budgeted net income
The greatest advantage that a flexible budget has is its adaptability
Help to react to opportunities
Helps in adjusting cost and margin
When flexible budgets should be used
possible to segregate fixed and variable cost in the budget model
able to determine the extend to which all variable cost changes as activity changes
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