Question

A company's master budget for October is to manufacture and sell 30,000 units for a total sales revenue of $270,000, total variable costs of $180,000, and total fixed costs of $24,000. The company actually manufactured and sold 32,000 units and generated $45,000 of operating income in October. The flexible-budget operating income in October was:

Answer 1

$72,000

Step-by-step explanation:

The Starting point for flexing a Budget is to determine the Standard unit Selling Price and unit Cost Prices, then apply the amounts to the actual activity/production as shown below ;

Flexible-budget for the month of October

Sales ($270,000/30,000 x 32,000) $288,000

Less Variable Costs ($180,000/30,000 x 32,000) ($192,000)

Contribution $96,000

Less Fixed Costs ($24,000)

Operating Income $72,000