Final answer:
The question requires preparing an actual income statement, flexible budget, and static budget for the Graham Corporation. The actual income statement shows an operating income of $3,775,000, the flexible budget shows an operating income of $2,565,000, and the static budget shows an operating income of $2,600,000.
Step-by-step explanation:
ncome Statement and Budget Analysis
The given question involves the preparation of an actual income statement, a flexible budget, and a static budget for the Graham Corporation based on its sales data.
The actual income statement is based on real figures, including the number of units sold and the costs incurred. The flexible budget takes into account the actual number of units sold and adjusts the budgeted figures accordingly, whereas the static budget remains unchanged and is based on the original budgeted amounts regardless of the actual units sold.
Actual Income Statement:
Sales (495,000 units × $10): $4,950,000
Variable Costs: $250,000
Fixed Costs: $925,000
Operating Income: $3,775,000
Flexible Budget:
Sales (495,000 units × $10): $4,950,000
Variable Costs (495,000 units × $3*): $1,485,000
Fixed Costs: $900,000
Operating Income: $2,565,000
*Assumed variable cost per unit based on the budgeted $1,500,000 for 500,000 units.
Static Budget:
Sales (500,000 units × $10): $5,000,000
Variable Costs: $1,500,000
Fixed Costs: $900,000
Operating Income: $2,600,000