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Problem 1. (8 Points).
Engineworks Co. provides the following fixed budget data for the year:
| Sales (20,000 units) . | | $600,000 |
| Cost of sales: | | |
| Direct materials .. | $200,000 | |
| Direct labor | 160,000 | |
| Variable overhead .. | 60,000 | |
| Fixed overhead .. | 80,000 | 500,000 |
| Gross profit . | | $100,000 |
| Operating expenses: | | |
| Fixed .. | $12,000 | |
| Variable . | 40,000 | 52,000 |
| Income from operations .. | | $ 48,000 |
| The company's actual activity for the year follows: | | |
| Sales (21,000 units) . | | $651,000 |
| Cost of goods sold: | | |
| Direct materials .. | $231,000 | |
| Direct labor | 168,000 | |
| Variable overhead .. | 73,500 | |
| Fixed overhead .. | 77,500 | 550,000 |
| Gross profit . | | $101,000 |
| Operating expenses: | | |
| Fixed . | 12,000 | |
| Variable . | 39,500 | 51,500 |
| Income from operations . | | $ 49,500 |
Required:
Prepare a flexible budget performance report for the year using the contribution margin format.
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