Question

The actual information pertains to the third quarter. As part of the budgeting​ process, the Duck Decoy Department of Paralith Incorporated had developed the following static budget for the third quarter. Duck Decoy is in the process of preparing the flexible budget and understanding the results. Actual Results Flexible Budget Static Budget Sales volume​ (in units) ​10,000 ​ ________ ​8,000 Sales revenues ​$239,000 ​$ ​$235,000 Variable costs ​167,000 ​$ ________ ​184,000 Contribution margin ​$72,000 ​$ ​$51,000 Fixed costs ​38,000 ​$ ________ ​33,000 Operating profit ​$34,000 ​$ ________ ​$18,000 The flexibleminusbudget variance for variable costs is​ ________. (Round the final answer to the nearest​ dollar.)

Answer 1

To calculate the profit-maximizing quantity for Doggies Paradise Inc., we need to calculate total revenue, marginal revenue, total cost, and marginal cost for each output level. Sketching the total revenue and total cost curves, as well as the marginal revenue and marginal cost curves, will help us determine the profit-maximizing quantity.

Step-by-step explanation:

To calculate the total revenue, we multiply the price of the dog coats by the number of units sold. For each output level, the total cost is the sum of the fixed and variable costs. The marginal revenue is the change in total revenue when one unit is sold, and the marginal cost is the change in total cost when one unit is produced.

Using these calculations, we can create a table and sketch the total revenue and total cost curves, as well as the marginal revenue and marginal cost curves. The profit-maximizing quantity is the level of output at which the marginal revenue equals the marginal cost.

In this case, the profit-maximizing quantity is the level at which the marginal revenue is equal to the marginal cost. We can determine this by finding the level of output where the two curves intersect on the diagram.

Answer 2

Paralith Incorporated

Duck Decoy Department

Flexible Budget for Third Quarter:

Actual Results Flexible Budget Static Budget

Sales volume​ (in units) ​10,000 ​ 10,000 ​8,000

Sales revenues ​ $239,000 ​ $293,750 ​$235,000

Variable costs ​167,000 ​ $ 230,000 $184,000

Contribution margin ​$72,000 ​ $63,750 ​$51,000

Fixed costs 38,000 ​ $33,000​ $33,000

Operating profit ​ $34,000 ​ $30,750​ $18,000

Step-by-step explanation:

a) Calculations for flexible budget:

Sales volume = 8,000/8,000 x 10,000 = 10,000 units

Sales revenue = $235,000/8,000 x 10,000 = $293,750

Variable costs = $184,000/8,000 x 10,000 = $230,000

Fixed Costs will remain at $33,000

b) A flexible budget is a budget that adjusts or flexes with changes according to the volume or activity level. On the other hand, the static budget amounts do not change from the amounts established at the time that the static budget was prepared and approved.