New Rock, Inc. sells video games it has purchased from a local distributor. The following static budget is based on sales of 8,000 games. However, New Rock only sold 7,800 games during the year. Fixed costs are 30% of total operating expenses

Sales$512,000Cost of goods sold (variable) 230,000Gross margin282,000Operating expenses220,000Net income$ 62,000

Prepare a flexible budget.

Question

Business

Cailyn Frost

19 September, 08:39

New Rock, Inc. sells video games it has purchased from a local distributor. The following static budget is based on sales of 8,000 games. However, New Rock only sold 7,800 games during the year. Fixed costs are 30% of total operating expenses

Sales$512,000Cost of goods sold (variable) 230,000Gross margin282,000Operating expenses220,000Net income$ 62,000

Prepare a flexible budget.

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Hank · Answer 1

Solution:

New Rock, Inc.

Flexible Budget

Sales Revenue (7,800 x $64) $499,200

Cost of Goods Sold (7,800 x $28.75) 224,250

Gross Profit 274,950

Variable operating expenses (7,800 x 19.25) 150,150

Fixed operating expenses ($220,000 x 0.30) 66,000

Net Income $58,800