Ch 23 Homework Outdoor Outters has created a flexible budget

Ch 23 Homework Outdoor Outters has created a flexible budget for the 70000-unit and the 80,000-unit levels of activity shown as follows Complene Oundoor Outfimenst\'s fexible budget at the 95,000-nit level of activity Assume thet the cost of goods sold and variable operating expenses vary drectly with sales and that income es remint 30 pencent of operating income

Solution

70000 units

80000 units

95000 units

Sales

$1400000

$1600000

=95000*20 (sales value per unit)

$1900000

Less: Cost of goods sold

$840000

$960000

= 1900000*0.6[cost of goods sold to sales]

$1140000

Gross profit on sales

$560000

$640000

=1900000-1140000

$760000

Less: Operating expenses ($90000 fixed)

$370000

$410000

=1900000*0.2(variable) +90000 (fixed)

$470000

Operating income

$190000

$230000

=760000-470000

$290000

Less: Income taxes@30% of operating income

$57000

$69000

=290000*0.3

$87000

Net Income

$133000

$161000

=290000-87000

$203000

Sales value per unit = 1400000/70000 = $20    or 1600000/80000 = $20

Cost of goods sold to sales = 840000/1400000=0.6 or 960000/1600000 = 0.6

Operating expense:

Fixed = 90000

Variable = 370000-90000 = 280000       or   410000-90000 = 320000

Variable operating expense to sales = 280000/1400000 = 0.2 or 320000/1600000 = 0.2

	70000 units	80000 units		95000 units
Sales	$1400000	$1600000	=95000*20 (sales value per unit)	$1900000
Less: Cost of goods sold	$840000	$960000	= 1900000*0.6[cost of goods sold to sales]	$1140000
Gross profit on sales	$560000	$640000	=1900000-1140000	$760000
Less: Operating expenses ($90000 fixed)	$370000	$410000	=1900000*0.2(variable) +90000 (fixed)	$470000
Operating income	$190000	$230000	=760000-470000	$290000
Less: Income taxes@30% of operating income	$57000	$69000	=290000*0.3	$87000
Net Income	$133000	$161000	=290000-87000	$203000