Question

Option #2: Smart Tech Company

Smart Tech Company's fixed budget (based on 7,500 units) for the first quarter of the calendar year 2019 reveals the following information shown below. Prepare a flexible budget that shows the variable cost per unit, fixed costs, and three different variable costs, and three different budgets for sales volumes of 5,000, 7,500 and 10,000. Please analyze your findings in a letter to upper management.

		Fixed Budget
Sales 7,500 Units			$2,500,000
Cost Of Goods Sold
Direct Materials	$150,000
Direct Labor	$250,000
Production Supplies	$125,000
Plant Manager Salary	$90,000		$615,000
Gross Profit			$1,885,000
Selling Expenses
Sales Commissions	$200,000
Packaging	$140,000
Advertising	$80,000		$420,000
Administrative Expenses
Administrative Salaries	$150,000
Depreciation – Office Equipment	$80,000
Insurance	$45,000
Office Rent	$75,000		$350,000
Income From Operations			$1,115,000

Please submit the assignment in an Excel spreadsheet using the answer template linked here. Be sure to select the correct option using the appropriate tab at the base of the spreadsheet

Answer 1

	Flexible budget		Flexible budget at
Particulars	Variable amount per unit	Total fixed cost	5,000	7500	10,000
Sales	333.33		1,666,650	2,499,975	3,333,300
Variable costs
Direct materials	20		100,000	150,000	200,000
Direct labor	33.33		166650	249975	333,300
Production supplies	16.67		83350	125025	166700
Sales commissions	28.57		142850	214275	285700
Packaging	18.67		93350	140025	186700
Total variable costs	117.24		586200	879300	1172400
contribution margin	216.09		1080450	1620675	2160900
Fixed costs
Plant manager salary		90,000	90,000	90,000	90,000
Advertising		80,000	80,000	80,000	80,000
Administrative Salaries		150,000	150,000	150,000	150,000
Depreciation off equip		80,000	80,000	80,000	80,000
Insurance		45,000	45,000	45,000	45,000
Office rent		75,000	75,000	75,000	75,000
total fixed costs		520000	520000	520000	520000
Income from operations			560450	1100675	1640900