Jake Co Has Prepared the Following Fixed Budget for the Year

question 54

Essay

Jake Co. has prepared the following fixed budget for the year, assuming production and sales of 30,000 units. This level of production represents 80% of capacity.
$\text { Take Co. Fixed Budget for Year Ending December } 31$
$\begin{array}{|l|r|r|} \hline \text { Sales } &&\$1,500,000\\\hline \text { Cost of goods sold:} &\\\hline \text { Direct materials } &\$540,000\\ \hline \text { Direct labor} &300,000\\ \hline \text { Indirect materials (variable)} &15,000\\\hline \text { Indirect labor (variable) } &21,000\\\hline \text { Depreciation } &180,000\\\hline \text {Salaries } &90,000\\ \hline \text { Utilities ( \( 80 \% \) fixed)} &54,000\\\hline \text { Maintenance (40\% variable) } &\underline{33,000}&\underline{1,233,000}\\ \hline \text {Gross profit } &&\$267,000\\\hline \text { Operating expenses: } &\\\hline \text { Commissions. } &\$45,000\\\hline \text {Advertising (fixed) } &60,000\\\hline \text { Wages (variable) } &15,000\\\hline \text { Rent } &\underline{30,000}\\\hline \text {Total operating expenses } &&\\underline{150,000}\\\hline \text { Income from operations} &&\underline{\$117,000}\\\hline \end{array}$
Calculate the following flexible budget amounts at the indicated levels of capacity:
$$\begin{array} { | l | l | l | l | } \hline & \begin{array} { l } \text { Operations at } \\60 \% \text { of Capacity }\end{array} & & \begin{array} { l } \text { Operations at } \\75 \% \text { of Capacity }\end{array} \\\hline \text { Sales } & & & \\\hline \text { Total variable costs } & & & \\\hline \text { Total fixed costs } & & & \\\hline \text { Income from operations } & & & \\\hline\end{array}$$

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Definitions:

Percent Equivalent

A value expressing a number as a fraction of 100, used to describe the relative size of a part to a whole.

Repeating Decimal

A decimal fraction in which a figure or group of figures repeats indefinitely.

Percent Equivalent

A value expressed as a percentage that represents a fraction of 100, indicating a part of a whole in percentage terms.

Terminating Decimal

A numerical value expressed in the decimal system with a limited number of digits following the decimal point.