Lapp Manufacturing Uses Flexible Budgets to Control Its Selling Expenses

question 66

Essay

Lapp Manufacturing uses flexible budgets to control its selling expenses. Monthly sales are expected to be from $400,000 to $480,000. Variable costs and their percentage relationships to sales are:
Fixed selling expenses consist of sales salaries $80,000 and depreciation on delivery equipment $20,000.
Instructions
Prepare a flexible budget for increments of $40,000 of sales within the relevant range.

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Definitions:

First-In, First-Out Method

A method of inventory valuation where the oldest inventory items are recorded as sold first, with the most recent costs remaining in inventory.

Conversion Costs

The combination of labor and manufacturing overhead costs that are incurred in turning raw materials into finished products.

First-In, First-Out Method

An inventory valuation method where the first items produced or acquired are the first ones sold or used, affecting cost of goods sold and inventory valuation.

Material Costs

The total cost of materials used in the production of goods, including both direct raw materials and indirect materials.