P2. Part 1. Bubba Gump Shrimp Boats, Inc (a wholly owned subsidiary of BGS,Co) had the following fixed budget for its first year of operations. Each boat is sold for the same price. All variable expenses listed below are based on sales units of producing 10 boats. In the space next to the budgeted totals, prepare a flexible budget for the same year if the company were to manufacture and sell a total of 11 boats. (8 points)
Assuming Assuming
10 Boats 11 Boats
Manufactured Manufactured
And Sold And Sold
Sales $300,000
Cost of goods sold:
Direct materials 50,000
Direct labor 70,000
Overhead 30,000
Gross profit $150,000
Variable expenses $ 60,000
Fixed expenses $ 30,000
Total expenses$ 90,000
Net income $ 60,000
P2. Part 2. Why is the net income number for the flexible budget of 11 boats manufactured and sold during the year different than the fixed budget for 10 boats? (1 point)