EXERCISE 23-10 Preparing a Flexible Budget

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EXERCISE 23-10 Preparing a Flexible Budget
The flexible budget at the 70,000-unit and the 80,000-unit levels of activity is shown below.

70,000 Units 80,000 Units 90,000 Units
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,400,000 $1,600,000 $
Cost of goods sold . . . . . . . . . . . . . . . . . . . . 840,000 960,000
Gross profit on sales . . . . . . . . . . . . . . . . . . . $ 560,000 $ 640,000 $
Operating expenses ($90,000 fixed) . . . . . . . 370,000 410,000
Operating income . . . . . . . . . . . . . . . . . . . . . $ 190,000 $ 230,000 $
Income taxes (30% of operating income) . . . 57,000 69,000
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 133,000 $ 161,000 $

Complete the flexible budget at the 90,000-unit level of activity. Assume that the cost of goods sold and variable operating expenses vary directly with sales and that income taxes remain at 30 percent of operating income.

FILE: MS WORD