Office Plus sells its main product, ergonomic mouse pads, for $13 each. Its variable cost is $5.10 per pad. Fixed costs are $205,000 per month for volumes up to 65,000 pads. Above 65,000 pads, monthly fixed costs are $250,000. Prepare a monthly flexible budget for the product, showing sales revenue, variable costs, fixed costs, and operating income for volume levels of 45,000, 55,000, and 75,000 pads.

Instructions are listed below.

Explanation:

Giving the following information:

Selling price = $13 each.

Variable cost = $5.10 per pad.

Fixed costs are $205,000 per month for volumes up to 65,000 pads.

Above 65,000 pads, monthly fixed costs are $250,000.

For 45,000 units:

Sales = 45,000*13 = 585,000

Total variable cost = (45,000*5.1) = (229,500)

Contribution margin = 355,500

Fixed costs = (205,000)

Net operating income = 150,000

For 55,000 units:

Sales = 55,000*13 = 715,000

Total variable cost = (55,000*5.1) = (280,500)

Contribution margin = 434,500

Fixed costs = (205,000)

Net operating income = 229,500

For 75,000 units:

Sales = 75,000*13 = 975,000

Total variable cost = (75,000*5.1) = (382,500)

Contribution margin = 592,500

Fixed costs = (250,000)

Net operating income = 342,500