Question

1. Last year, ABC corporation estimated harvesting and sales of 7,000 banana treats. The company actually produced and sold 6,000 treats. Each treat has a standard stipulating 1.4 pounds of ingredients at a budgeted cost of $1.50 per pound and 3 hours of mixing time at a cost of $10.50 per hour. The treats sell for $30.00 each. Actual costs for the production of 6,000 treats were $12,900 for ingredients (8,600 pounds at $1.50 per pound) and $178,350 for labor (17,400 hours at $10.25 per hour). What is ABC's income/(loss) based on a flexible budget?

Answer 1

Income/(loss) based on a flexible budget:
Flexible Sales revenue ` [6,000 units x $30 per unit]	$180,000.00
Less: Flexible material cost [6,000 units x 1.40 pounds x $1.50 per pound]	$12,600.00
Less: Flexible Labor cost [6,000 units x 3 hours x $10.50 per hour]	$189,000.00
Income / (loss)	($21,600.00)