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Pebco Company's 2011 master budget included the following fixed budget report. It is based on an expected production and sales volume of 20,000 units.


PEBCO COMPANY

Fixed Budget Report

For Year Ended December 31,2011

Sales


$3,000,000

Cost of goods sold



Direct materials

$1,200,000


Direct labor

260,000


Machinery repairs (variable cost)

57,000


Depreciation plant equipment

250,000


Utilities ($50,000 is variable)

200,000


Plant management salaries

140,000

2,107,000

Gross profit


893,000

Selling expenses



Packaging

80,000


Shipping

116,000


Sales Salary (fixed annual ammount)

160,000

356,000

General and administrative expenses



Advertising expense

81,000


Salaries

241,000


Entertainment expense

90,000

412,000

Income from operations


$ 125,000


Required:


  1. Classify all items listed in the fixed budget as variable or fixed. Also determine their amounts per unit or their amounts for the year, as appropriate.


  1. Prepare flexible budgets (see Exhibit 24.3) for the company at sales volumes of 18,000 and 24,000 units.

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