Windsor Limited makes and sells a single product. The company employs a flexible budgeting system that covers a relevant range from 20,000 units to 25,000 units and a just in time inventory system. Budget data for April, based on 22,000 units, are as follows:
$\begin{array} { | l | r | }
\hline \text { Prime costs } & \$ 30 \text { per unit } \
\hline \text { Manufacturing overhead } & \$ 132,000 \text { plus } \$ 3 \text { per unit } \
\hline \text { Selling and administrative expenses } & \$ 30,000 \text { plus } \$ 2 \text { per unit } \
\hline \text { Selling price } & \$ 60 \text { per unit } \
\hline
\end{array}$

-Suppose the company produces and sells 25,000 units instead of the original 22,000 units at an average selling price of $55.What is the company's flexible budget operating income (loss)for April,given the actual sales volume of 25,000 units?

Question

Windsor Limited makes and sells a single product. The company employs a flexible budgeting system that covers a relevant range from 20,000 units to 25,000 units and a just in time inventory system. Budget data for April, based on 22,000 units, are as follows:
$\begin{array} { | l | r | } 
\hline \text { Prime costs } & \$ 30 \text { per unit } \
\hline \text { Manufacturing overhead } & \$ 132,000 \text { plus } \$ 3 \text { per unit } \
\hline \text { Selling and administrative expenses } & \$ 30,000 \text { plus } \$ 2 \text { per unit } \
\hline \text { Selling price } & \$ 60 \text { per unit } \
\hline
\end{array}$

-Suppose the company produces and sells 25,000 units instead of the original 22,000 units at an average selling price of $55.What is the company's flexible budget operating income (loss)for April,given the actual sales volume of 25,000 units?

Quizplus · Accepted Answer

To calculate the flexible budget operating income for 25,000 units, we need to calculate the total revenue, total costs, and then subtract the total costs from the total revenue.1. **Total Revenue**: The selling price is $55 per unit for 25,000 units, so total revenue is $25,000 \times \$55 = \$1,375,000$.2. **Total Costs**:    - **Prime Costs**: $25,000 \times \$30 = \$750,000$.   - **Manufacturing Overhead**: Fixed at \$132,000 plus $25,000 \times \$3 = \$75,000$, totaling \$207,000.   - **Selling and Administrative Expenses**: Fixed at \$30,000 plus $25,000 \times \$2 = \$50,000$, totaling \$80,000.   - **Total Costs**: \$750,000 (Prime Costs) + \$207,000 (Manufacturing Overhead) + \$80,000 (Selling and Administrative Expenses) = \$1,037,000.3. **Operating Income**: $Total Revenue - Total Costs = \$1,375,000 - \$1,037,000 = \$338,000$.It appears there was a mistake in my calculation. Let's correct that:**Correct Total Revenue**: $25,000 \times \$55 = \$1,375,000$.**Correct Total Costs**: - **Prime Costs**: $25,000 \times \$30 = \$750,000$.- **Manufacturing Overhead**: \$132,000 + $25,000 \times \$3 = \$75,000$, totaling \$207,000.- **Selling and Administrative Expenses**: \$30,000 + $25,000 \times \$2 = \$50,000$, totaling \$80,000.- **Correct Total Costs**: \$750,000 + \$207,000 + \$80,000 = \$1,037,000.**Correct Operating Income**: $Total Revenue - Total Costs = \$1,375,000 - \$1,037,000 = \$338,000$.Given the options provided, it seems there was an error in my initial calculation or interpretation of the options. The correct process to calculate the flexible budget operating income involves calculating the total revenue and subtracting the total costs. However, based on the options provided and the calculations, there seems to be a discrepancy in the final answer. The correct approach was demonstrated, but the final answer does not match any of the options, indicating a need to reevaluate the calculations or the options provided. Without the ability to correct or provide additional context, the explanation above outlines the method to calculate the flexible budget operating income, but the final numerical answer provided does not align with the options, suggesting a miscalculation or misunderstanding in the initial response.

Windsor Limited Makes and Sells a Single Product -Suppose the Company Produces and Sells 25,000 Units Instead of Employs