Page 261 - P1 Integrated Workbook STUDENT 2018

Answers

Example 6

Olsen has prepared the following fixed budget for next year:

Activity level 10,000 units
Sales $100,000
Variable costs $40,000
Fixed costs $20,000
Budgeted profit $40,000
Olsen wants to create flexible budgets in case activity falls or rises by 20%.

Prepare flexible budgets for the next year.

Solution

Activity level 8,000 10,000 12,000
Sales $80,000 $100,000 $120,000

Variable costs $32,000 $40,000 $48,000
Fixed costs $20,000 $20,000 $20,000

Budgeted profit $28,000 $40,000 $52,000

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