Raffel jeans management decides that the 16,000 units is most likely output volume, and sets the static budget based on this sale and production level

Project 1 :

 

Following is a monthly given income statement for Raffel jeans, a small newly started fashion jeans manufacturer business. The pro forma analysis was prepared at the beginning of the month and considered three alternative sales levels. The company has no variable marketing costs.

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Income statement line item

Budgeted amount per unit

Pre-forma analysis for

Alternative output levels

10,000 units

20,000 units

30,000 units

Revenue

$35

$350,000

$700,000

$1,050,000

Variable costs:

 

Material

 

Labor

 

Overhead

 

Total

 

 

 

13

 

  8

 

  5

 

26

 

 

130,000

 

 80,000

 

50,000

 

260000

 

 

260,000

 

160,000

 

100,000

 

520,000

 

 

3,90,000

 

240,000

 

150,000

 

780,000

Contributing margin:

$10

100,000

200,000

300,000

Fixed costs:

 

Manufacturing

 

Overhead

 

Marketing cost

 

Total fixed cost

 

Operating income

 

 

 

 

 

 

 

 

 

100,000

 

50,000

 

150,000

 

($50,000)

 

 

 

 

100,000

 

50,000

 

150,000

 

$50,000

 

 

 

 

100,000

 

50,000

 

150,000

 

$150,000

 

Since by definition, fixed costs are not expected to change as volume of output changes within the relevant range, fixed costs remain the same at all three projected levels of output. Revenue and variable costs vary with output in a linear fashion. Hence, when output increases 100% from10,000 units to 20,000 units, revenue, each line-item for variable costs, and contribution marginal increase 100%

 

Raffel jeans management decides that the 16,000 units is most likely output volume, and sets the static budget based on this sale and production level

 

Using the above given data, prepare and compute in an Excel sheet using different tabs of the sheet for each one of the following calculations;

  • Static budget for 10,000 units
  • Actual result for 16,000 units
  • Operating income
  • Static budget variance
  • Prepare flexible budget for end on the month
  • Variation in operating income
  • Actual results
  • Flexible budget variance

You must attach the screen shot of the task performed and hand out a print out to the assessor.

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