Elroy CoHas Prepared the Following Fixed Budget for the Year, Assuming

question 130

Essay

Elroy 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.
$\begin{array}{c}\text { ELROY CO. }\\\text { Fixed Budget }\\\text { For Year Ending December 31 }\\\hline \begin{array}{lr}\text { Sales }&&\$ 1,500,000\\\text { Cost of goods sold: }\\\text { Direct materials } & \$ 540,000 \\\text { Direct labor } & 300,000 \\\text { Indirect materials (variable) } & 15,000 \\\text { Indirect labor (variable) } & 21,000 \\\text { Depreciation } & 180,000 \\\text { Salaries } & 90,000 \\\text { Utilities ( } 80 \% \text { fixed) } & 54,000 \\\text { Maintenance ( } 40 \% \text { variable) } & \underline { 33,000}& \underline {1,233,000}\\\text { Gross profit }&&\$ 267,000\\\text { Operating expenses: }\\\text { Commissions } & \$ 45,000 \\\text { Advertising (fixed) } & 60,000 \\\text { Wages (variable) } & 15,000 \\\text { Rent } & \underline { 30,000 }\\\text { Total operating expenses }&& \underline{150,000}\\\text { Income from operations }&& \underline{\$ 117,000}\\\end{array}\end{array}$ Calculate the following flexible budget amounts at the indicated levels of capacity:
$\begin{array}{ll}&\text { Operations at } & \text { Operations at } \\ &\underline {60 \% \text { of Capacity } }& \underline{75 \% \text { of Capacity }}\\ \text { Sales } &\underline { \quad\quad\quad\quad\quad\quad\quad } &\underline { \quad\quad\quad\quad\quad\quad\quad } \\ \text {Total variable costs } &\underline { \quad\quad\quad\quad\quad\quad\quad } &\underline { \quad\quad\quad\quad\quad\quad\quad } \\ \text { Total fixed costs } &\underline { \quad\quad\quad\quad\quad\quad\quad } &\underline { \quad\quad\quad\quad\quad\quad\quad } \\ \text { Income from operations } &\underline { \quad\quad\quad\quad\quad\quad\quad } &\underline { \quad\quad\quad\quad\quad\quad\quad } \\\end{array}$

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Definitions:

Homogeneous Oligopolists

Firms in an oligopoly that sell products so similar that consumers perceive them as identical, leading to competition based primarily on price.

Differentiated Oligopolists

Firms in an oligopolistic market structure that distinguish their products from those of competitors through branding, quality, or other means.

Collusive Oligopoly

A market situation where a few firms dominate the market and make coordinated efforts to control prices and market shares, often illegally or in violation of competitive practices.

Noncollusive Oligopoly

A market structure where a few dominant firms compete without any explicit agreements to fix prices or market shares, often leading to intense competition.