SnoGo, Inc., produces ergonometric tools used for snow removal. The company's static budget income statement for January follows. It is based on expected sales volume of 5,500 tools.
SnoGo's manufacturing capacity is 6,250 tools. If actual volume exceeds 6,250 tools, the company must expand the plant. In that case, salaries will increase by 10%, depreciation by 15%, and rent by $1,500. Fixed utilities will be unchanged by any volume increase.
Prepare flexible budget income statements for the company, showing output levels of 5,500, 6,000 and 6,500 tools.

Question

SnoGo, Inc., produces ergonometric tools used for snow removal. The company's static budget income statement for January follows. It is based on expected sales volume of 5,500 tools.
  SnoGo's manufacturing capacity is 6,250 tools. If actual volume exceeds 6,250 tools, the company must expand the plant. In that case, salaries will increase by 10%, depreciation by 15%, and rent by $1,500. Fixed utilities will be unchanged by any volume increase.
Prepare flexible budget income statements for the company, showing output levels of 5,500, 6,000 and 6,500 tools.

Quizplus · Accepted Answer

The Answer of SnoGo, Inc., produces ergonometric tools used for snow removal. The company's static budget income statement for January follows. It is based on expected sales volume of 5,500 tools.
  SnoGo's manufacturing capacity is 6,250 tools. If actual volume exceeds 6,250 tools, the company must expand the plant. In that case, salaries will increase by 10%, depreciation by 15%, and rent by $1,500. Fixed utilities will be unchanged by any volume increase.
Prepare flexible budget income statements for the company, showing output levels of 5,500, 6,000 and 6,500 tools.