Reference no: EM132568979

Kiegen set up a stall selling bubble tea in a flea market for 2 days. He has prepared a simple budget to keep track of his finances before setting up the stall.

Expected Sales and Expenses for 2 Days

Expected sale of bubble tea (in cups)                            500

Selling price of each cup of bubble tea                           $4.50

Ingredients and packing costs for 500 cups of bubble tea    $600

Rental of the stall                  $400

Expected net profit                 $1,250

When the flea market ended, Kiegen found that the actual sale of the bubble tea was 580 cups and he had made a profit of $1,400. He felt that he has controlled the costs well and the result was a higher than expected net profit.

Question a) State the quantity (no. of cups) of bubble tea the flexible budget should be based Question

Question b) Identify the items which will be "flexed" when preparing a flexible budget. Explain why they need to be adjusted in the context of the question.

Question c) Calculate the budgeted ingredients and packing costs that should be reflected in the Flexible Budget. Show your workings clearly.

Question d) Calculate the Net Profit that Kiegen should get according to the Flexible Budget. Show your workings clearly.

Question e) Did Kiegen do well in controlling the costs? Explain your answers and give TWO (2) reasons to support your answer.