Answer Happy

Appliance Possible Inc. (AP) is a manufacturer of toaster ovens. To improve control over operations, the president of AP wants to begin using a flexible budgeting system, rather than use only the current master budget. The following data are available for AP's expected costs at production levels of 89,000, 103,000, and 117,000 units. Variable costs Manufacturing Administrative Selling Fixed costs Manufacturing Administrative (a) $7 per unit $4 per unit $2 per unit $151,000 $77,000

Prepare a flexible budget for each of the possible production levels: 89,000, 103,000, and 117,000 units. (List variable costs before fixed costs.) Activity Level Production Levels Variable Costs Manufacturing Administrative Selling Total Variable Costs Foxed Costs Manufacturing Administrative APPLIANCE POSSIBLE INC. Flexible Production Cost Budget 89000 623000 356000 178000 i 1157000 i 151000 77000 i 103000 721000 412000 i 206000 1339000 i 151000 i i i 77000 i 11: 819000 46800X 234000 1521000 15100 77000

Activity Level Production Levels Variable Costs Manufacturing Administrative Selling Total Variable Costs Fixed Costs Manufacturing Administrative Total Fixed Costs Total Costs 89000 623000 i 356000 i 178000 1157000 151000 i 77000 228000 1385000 i i 103000 721000 412000 i 206000 1339000 i 151000 i 77000 i i 228000 i 1567000 i 1 11: 819000 468000 234000 1521000 151000 77000 22800( 1749000

vity Level duction Levels able Costs inufacturing ministrative ling I Variable Costs d Costs inufacturing ministrative I Fixed Costs Costs 89000 623000 i 356000 i 178000 1157000 i 151000 i 77000 i 228000 i 1385000 $ 103000 721000 412000 i 206000 i 1339000 151000 i 77000 1567000 i 228000 i i $ 117000 819000 i 468000 234000 i 1521000 151000 77000 i 1749000 i i 228000 i

(b) If AP sells the toaster ovens for $17 each, how many units will it have to sell to make a profit of $208,000 before taxes? Units to be sold