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

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Definitions:

Buffer

Buffer is a protective barrier or cushioning mechanism that mitigates the negative impact of environmental changes or stressors, often used in the context of stress management.

Stress

A psychological and physical response to perceived challenges or threats, which can affect an individual's health, well-being, and performance.

Recession

A period of temporary economic decline during which trade and industrial activities are reduced, generally identified by a fall in GDP in two successive quarters.

False Front

Presenting a deceptive outward appearance or attitude that hides one's true self or feelings.