Preparing a Flexible Budget
LO6
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.