The actual information pertains to the month of June. As a part of the budgeting process, Great Cabinets Company developed the following static budget for June. Great Cabinets is in the process of preparing the flexible budget and understanding the results. ActualResults FlexibleBudget StaticBudget Sales volume (in units) 12,000 16,000 Sales revenues $600,000 $ $800,000 Variable costs 240,000 $ 322,240 Contribution margin $360,000 $ $477,760 Fixed costs 275,100 $ 269,700 Operating profit $84,900 $ $208,060 The flexible budget will report for variable costs.

The flexible budget will report  $ 320,000 for variable costs.

Explanation:

Great Cabinets Company

                                  Actual Results    Flexible Budget    Static   Budget

Sales volume (in units) 12,000                            16,000

Sales revenues          $600,000             $                         $ 800,000

Variable costs          240,000           $                 322,240

Contribution margin $360,000         $                                 $477,760

Fixed costs             275,100                $              269,700

Operating profit      $84,900             $              $208,060

The flexible budget will report $ 320,000 for variable costs.

For 16000 units the Flexible Budget would be

Sales Revenue           ($600,000 /12000)16000 =$ 800,000

Variable Costs           (240,000 /12000)16000 =  $ 320,000

Contribution Margin        $ 480,000                                    

Fixed Costs                          275,100  ( assuming fixed costs to be same

                                                                        for 16000 units)

Operating Profit                  204,900

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having a short history provide very little data for the lenders. they wouldn't be able to determine your credit behavior from such a small samples. even if they are perfect.

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