Whidbey Co Prepare a Flexible Budget for Whidbey Co

question 184

Essay

Whidbey Co. fixed budget for the year is shown below:
$\begin{array}{|l|c|c|}\hline \text { Sales (50,000 units) } & & \$ 1,300,000 \\\hline \text { Cost of goods sold: } & & \\\hline \text { Direct materials } & \$ 150,000 & \\\hline \text { Direct labor} & 450,000 & \\\hline\text { Overhead (includes } \$ 2 \text { per unit variable } \\\text { overhead) }& 240,000 & 840,000 \\\hline \text { Gross profit } & & \$ 460,000 \\\hline \text { Selling expenses: } & & \\\hline \text { Sales commissions (all variable) } & 60,000 & \\\hline \text { Rent (all fixed) } & 40,000 & \\\hline \text { Insurance (all fixed) } & 35,000 & \\ \hline \text {General and administrative expenses: } & & \\\hline \text { Salaries (all fixed) } & 72,000 & \\\hline & 54,000 & \\\hline \text { Depreciation (all fixed) ...... } & 31,000 & 292,000 \\\hline\text { Net income from operations }&&\$168,000\\ \hline\end{array}$ Prepare a flexible budget for Whidbey Co. that shows a detailed budget for its actual sales volume of 42,000 units. Use the contribution margin format.

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Definitions:

Accumulated Depreciation

The total amount of depreciation expense that has been recorded for an asset since it was acquired, reducing its book value.

Remaining Useful Life

The estimated time period that an asset is expected to be functional and economically viable.

Gain on Disposal

The financial profit made from selling or disposing of a fixed asset for more than its book value.

Accumulated Depreciation

The total depreciation expense charged for an asset since it was put into use, reflecting its loss of value over time.