Exercise 24-7 Appliance Possible Inc. (AP) is a manufacturer of toaster ovens. T
ID: 2574420 • Letter: E
Question
Exercise 24-7 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 89,000, 104,000, and 119,000 units Variable costs $6 per unit $3 per unit $1 per unit Administrative Selling Fixed costs $160,000 $72,000 Administrative Prepare a flexible budget ftor each of the possble production levele: 89,000, 104,000, and 119,000units. (ist variable costs betore fixed costs) POSSIBLEI NC Flexible Production Cost BudgetExplanation / Answer
Answer 1. Appliance Possible Inc. Flexible Production Cost Budget Units Produced 89,000 104,000 119,000 Variable Costs: Manufacturing - $6 per Unit 534,000 624,000 714,000 Administrative - $3 per Unit 267,000 312,000 357,000 Selling - $1 per Unit 89,000 104,000 119,000 Total Variable Costs 890,000 1,040,000 1,190,000 Fixed Costs: Manufacturing 160,000 160,000 160,000 Administrative 72,000 72,000 72,000 Total Fixed Costs 232,000 232,000 232,000 Total Costs 1,122,000 1,272,000 1,422,000 Answer 2. BEP (In Units + Target Profit) = (Fixed Cost + Target Profit) / Contribution per unit Contribution per Unit = $15 (Selling Price) - ($6 + $3 + $1) (Variable Costs) Contribution per Unit = $5 BEP (In Units + Target Profit) = ($232,000 + $329,000) / $5 BEP (In Units + Target Profit) = 112,200 Units
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