Kitchen Help Inc. (KHI) is a manufacturer of toaster ovens. To improve control over operations, the president of KHI wants to begin using a flexible budgeting system, rather than use only the current master budget. The following data are available for KHI’s expected costs at production levels of 90,000, 100,000, and 110,000 units.
|
Variable costs |
|
|
Manufacturing |
$6 per unit |
|
Administrative |
$3 per unit |
|
Selling |
$1 per unit |
|
Fixed costs |
|
|
Manufacturing |
$150,000 |
|
Administrative |
$80,000 |
Instructions
(a) Prepare a flexible budget for each of the possible production levels: 90,000, 100,000, and 110,000 units.
(b) If KHI sells the toaster ovens for $15 each, how many units will it have to sell to make a profit of $250,000 before taxes?