Problem: The flexible budget at the 70,000-unit and the 80,000-unit levels of activity is shown below.
70,000 Units 80,000 Units 90,000 Units
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$1,400,000 $1,600,000 $
Cost of goods sold . . . . . . . . . . . . . . . . . . . . 840,000 960,000 $
Gross profit on sales . . . . . . . . . . . . . . . . . . . $ 560,000 $640,000 $
Operating expenses ($90,000 fixed) . . . . . . . 370,000 410,000 $
Operating income . . . . . . . . . . . . . . . . . . . . . $190,000 $230,000 $
Income taxes (30% of operating income) . . . 57,000 69,000 $
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $133,000 $161,000 $
Complete the flexible budget at the 90,000-unit level of activity. Assume that the cost of goods sold and variable operating expenses vary directly with sales and that income taxes remain at 30 percent of operating income.