Generating a Flexible Budget Balmer Corporation's master (static) budget for the year is shown below:
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Sales (50,000 units) Cost of goods sold: Direct materials
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$150,000
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$1,600,000
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Direct labor
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450,000
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Overhead (Variable overhead
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applied at 40% of direct labor cost)
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240,000
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840,000
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Gross profit
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$ 760,000
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Selling expenses:
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Sales commissions (all variable)
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$160,000
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Rent (all fixed)
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40,000
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Insurance (all fixed)
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30,000
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General expenses:
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Salaries (all fixed)
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92,000
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Rent (all fixed)
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77,000
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Depreciation (all fixed)
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51,000
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450,000
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Operating income
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$ 310,000
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Required
1. During the year the company actually manufactured and sold 42,000 units of product. Prepare an Excel spreadsheet that contains a flexible budget for this level of output.
2. Suppose, however, that the actual level of output had been 52,000 units of output. Rerun your spread- sheet to generate a flexible budget for this level of output.
3. Of what relevance is the notion of "relevant range" when preparing pro forma budgets or a flexible budget for control purposes?