Question

Exercise 10-7 (Video) 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 87,000, 102,000, and 117,000 units. Variable costs     Manufacturing $7 per unit     Administrative $3 per unit     Selling $2 per unit Fixed costs     Manufacturing $138,000     Administrative $75,000

Prepare a flexible budget for each of the possible production levels: 87,000, 102,000, and 117,000 units. (List variable costs before fixed costs.) APPLIANCE POSSIBLE INC. Flexible Production Cost Budget ManufacturingAdministrativeProduction LevelsVariable CostsSellingTotal CostsActivity LevelTotal Fixed CostsFixed CostsTotal Variable Costs     Administrative    Activity Level    Fixed Costs    Selling    Manufacturing    Total Variable Costs    Variable Costs    Production Levels    Total Costs    Total Fixed Costs     Total Fixed CostsSellingAdministrativeFixed CostsManufacturingProduction LevelsVariable CostsTotal CostsTotal Variable CostsActivity Level     Activity Level    Variable Costs    Total Fixed Costs    Production Levels    Total Variable Costs    Selling    Total Costs    Administrative    Fixed Costs    Manufacturing     $ $ $     Total Costs    Variable Costs    Total Fixed Costs    Administrative    Total Variable Costs    Activity Level    Production Levels    Selling    Fixed Costs    Manufacturing         Variable Costs    Production Levels    Total Fixed Costs    Total Variable Costs    Selling    Administrative    Manufacturing    Activity Level    Fixed Costs    Total Costs     ManufacturingSellingProduction LevelsFixed CostsTotal CostsAdministrativeTotal Fixed CostsTotal Variable CostsVariable CostsActivity Level Total Fixed CostsManufacturingAdministrativeVariable CostsTotal Variable CostsProduction LevelsSellingActivity LevelTotal CostsFixed Costs     Activity Level    Administrative    Selling    Variable Costs    Manufacturing    Production Levels    Fixed Costs    Total Costs    Total Fixed Costs    Total Variable Costs         Administrative    Fixed Costs    Variable Costs    Total Fixed Costs    Manufacturing    Production Levels    Selling    Activity Level    Total Costs    Total Variable Costs     Production LevelsTotal Variable CostsManufacturingSellingTotal Fixed CostsTotal CostsVariable CostsAdministrativeFixed CostsActivity Level Production LevelsManufacturingVariable CostsTotal Variable CostsTotal Fixed CostsActivity LevelAdministrativeSellingFixed CostsTotal Costs $ $ $

If AP sells the toaster ovens for $17 each, how many units will it have to sell to make a profit of $319,000 before taxes? Units to be sold

Answer 1

Requirement: 1 Appliance Possible Inc Flexible Production cost Budget 87000 102000 117000 Activity level Finished units Variable costs Manufacturing Administrative Selling Total variable Costs Fixed Costs Manufacturing Administrative Total Fixed cost Total Costs 609000 261000 174000 1044000 714000 306000 204000 1224000 819000 351000 234000 1404000 138000 75000 213000 1257000 138000 138000 750001 75000 2130002 13000 1437000 1617000 Requirement: 2 Units tobe sold = (Fixed Expenses + Target profit) / Contribution margin per unit Fixed expenses 213000 Target Profit 319000 Contribution margi per unit 5.00 Units tobe sold 106400