Question

What is an example of a flexible budget (including budgeted

net income before tax), assuming Rassmussen produces and sells
8,000 cases of wine.
b. Calculate the break-even number of cases.

Answer 1

An example of a flexible budget for Rassmussen can be seen by calculating the budgeted net income before tax when they produce and sell 8,000 cases of wine. The total revenue, total variable costs, fixed costs, total costs, and budgeted net income before tax can be calculated step by step.

Step-by-step explanation:

An example of a flexible budget can be seen by calculating the budgeted net income before tax for Rassmussen, assuming they produce and sell 8,000 cases of wine.

1. Calculate the total revenue by multiplying the quantity of cases sold (8,000) by the price per unit ($25), which equals $200,000.
2. Calculate the total variable costs. Let's say the variable cost per case of wine is $10. Then the total variable costs would be 8,000 cases multiplied by $10, which equals $80,000.
3. Calculate the fixed costs, which are costs that do not change with the level of production. Let's say the fixed costs are $100,000.
4. Calculate the total costs by adding the total variable costs ($80,000) and the fixed costs ($100,000), which equals $180,000.
5. Finally, calculate the budgeted net income before tax by subtracting the total costs ($180,000) from the total revenue ($200,000), which equals $20,000.