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Pebco Company’s 2011 master budget included the following fixed budget report. It is based on an expected production and sales volume of 16,000 units. |
| PEBCO COMPANY Fixed Budget Report For Year Ended December 31, 2011 |
| Sales | $ | 4,000,000 | |||
| Cost of goods sold | |||||
| Direct materials | $ | 1,005,000 | |||
| Direct labor | 225,000 | ||||
| Machinery repairs (variable cost) | 75,000 | ||||
| Depreciation”plant equipment | 300,000 | ||||
| Utilities ($55,000 is variable) | 215,000 | ||||
| Plant management salaries | 215,000 | 2,035,000 | |||
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| Gross profit | 1,965,000 | ||||
| Selling expenses | |||||
| Packaging | 75,000 | ||||
| Shipping | 110,000 | ||||
| Sales salary (fixed annual amount) | 260,000 | 445,000 | |||
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| General and administrative expenses | |||||
| Advertising expense | 130,000 | ||||
| Salaries | 251,000 | ||||
| Entertainment expense | 100,000 | 481,000 | |||
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| Income from operations | $ | 1,039,000 | |||
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| Pebco Company’s actual income statement for 2011 follows. |
| PEBCO COMPANY Statement of Income from Operations For Year Ended December 31, 2011 |
| Sales (19,000 units) | $ | 4,798,000 | |||
| Cost of goods sold | |||||
| Direct materials | $ | 1,208,438 | |||
| Direct labor | 276,188 | ||||
| Machinery repairs (variable cost) | 80,063 | ||||
| Depreciation”plant equipment | 300,000 | ||||
| Utilities (fixed cost is $157,000) | 221,563 | ||||
| Plant management salaries | 225,000 | 2,311,252 | |||
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| Gross profit | 2,486,748 | ||||
| Selling expenses | |||||
| Packaging | 86,813 | ||||
| Shipping | 122,625 | ||||
| Sales salary (annual) | 277,000 | 486,438 | |||
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| General and administrative expenses | |||||
| Advertising expense | 138,000 | ||||
| Salaries | 251,000 | ||||
| Entertainment expense | 103,500 | 492,500 | |||
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| Income from operations | $ | 1,507,810 | |||
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| Required: | |
| 1. |
Prepare a flexible budget performance report for 2011. |