Reference no: EM132783207
Question - Use the following data to show how to prepare planned operating budget for Hi-Lo Company for the year ending December 31, 2019: Planned operating budget for Hi-Lo Company for the year ending December 31, 2019.
Plant capacity 100,000 Units
Expected Sales Volume 90,000 Units
Expected Production 90,000 units
Actual Production 90,000 units
Forecasted Selling Price 12.00 Per unit
Actual Selling Price 13.50 per unit
Manufacturing Cost
Variable Per unit
Direct Material 3.60
Direct Labor 1.50
Manufacturing OH 2.25
Fixed Manufacturing OH 108,000
Selling & Administrative
Variable Per unit 1.20
Fixed 60,000
Assume no beginning or ending inventory. Federal income taxes are budgeted at 40% of income before federal income taxes.
2. The actual operating data for the year ending December 31, 2019, follow:
Sales $1,080,000
Cost of goods Sold
Direct Materials $337,500
Direct Labor 135,000
Variable Manufacturing OH 202,000
Fixed Manufacturing OH 108,000
Total 783,000
Less: Ending Inventory(783,000 * 10/90 87,000 $696,000
Gross Margin $384,000
Selling Expenses
Variable $102,000
Fixed 72,000 174,000
Income Before Federal Income Taxes $210,000
Deduct Federal income tax @ 40% 84,000
Net Income 126,000
a. Show how to prepare a planned operating budget for the year ended December 31, 2019, for part (1).
b. Using a flexible operating budget, compare expected amounts versus actual.
c. Using the report created in part b., analyze the efficiency of operations and comment on the company's sales and production policies for part (2).