Amanda Manufacturing Company prepared the following static budget income statement: Revenues $ 125,000 Variable Costs (75,000) Contribution Margin 50,000 Fixed Costs (30,000) Net Income $ 20,000 The budgeted costs were based on a planned sales volume of 5,000 units. Actual production was 6,000 units. The amount of net income based on a flexible budget of 6,000 units would have been

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Business

Eddie Oconnor

31 July, 08:38

Amanda Manufacturing Company prepared the following static budget income statement: Revenues $ 125,000 Variable Costs (75,000) Contribution Margin 50,000 Fixed Costs (30,000) Net Income $ 20,000 The budgeted costs were based on a planned sales volume of 5,000 units. Actual production was 6,000 units. The amount of net income based on a flexible budget of 6,000 units would have been

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Samuel Carney · Answer 1

Based on Flexible Budget Net income is = $30000

Explanation:

First we need to find contribution margin per unit based on static budget

Contribution margin per unit = Total Contribution Margin / Units Volume

Contribution Margin Per Unit = $50000 / 5000 = $10 Per unit

Now using contribution per Unit we can find total contribution at flexible budget.

Total Contribution margin at flexible budget = Contribution Margin Per Unit x Flexible budget units

Total Contribution Margin = $10 x 6000 Units = $60000

Using Total contribution margin less total fixed cost we can get operating income of flexible budget.

Operating income = Total contribution Margin - Total Fixed cost

Operating income = $60000 - $30000 = $30000