SnoGo, Inc., produces plastic tray used in cafeterias and for snow sledding.
The company's static budget income statement for January follows. It is based on expected sales volume of 50,000 trays.

SnoGo's manufacturing capacity is 62,500 trays. If actual volume exceeds 62,500 trays,the company must expand the plant. In that case, salaries will increase by 15%, depreciation by 10%, and rent by $275. Fixed utilities will be unchanged by any volume increase.
Prepare flexible budget income statements for the company, showing output levels of 50,000, 60,000 and 70,000 trays.

Question

SnoGo, Inc., produces plastic tray used in cafeterias and for snow sledding.
The company's static budget income statement for January follows. It is based on expected sales volume of 50,000 trays.
  
SnoGo's manufacturing capacity is 62,500 trays. If actual volume exceeds 62,500 trays,the company must expand the plant. In that case, salaries will increase by 15%, depreciation by 10%, and rent by $275. Fixed utilities will be unchanged by any volume increase.
Prepare flexible budget income statements for the company, showing output levels of 50,000, 60,000 and 70,000 trays.

Quizplus · Accepted Answer

The Answer of SnoGo, Inc., produces plastic tray used in cafeterias and for snow sledding.
The company's static budget income statement for January follows. It is based on expected sales volume of 50,000 trays.
  
SnoGo's manufacturing capacity is 62,500 trays. If actual volume exceeds 62,500 trays,the company must expand the plant. In that case, salaries will increase by 15%, depreciation by 10%, and rent by $275. Fixed utilities will be unchanged by any volume increase.
Prepare flexible budget income statements for the company, showing output levels of 50,000, 60,000 and 70,000 trays.