Module 4 - SLP

Module 4 - SLP

Flexible Budget

Firm XYZ

Income Statement

Flexible Budget

Year 02

Year 03

Item

 

 

 

 

16,000 units

 

 

Revenue

$640,000

$704,000

$774,400

 

 

 

 

Variable costs:

 

 

 

Materials

240,000

240,000

240,000

Labor

160,000

160,000

160,000

Overhead

80,000

60,000

40,000

Total

480,000

460,000

440,000

 

 

 

 

Contribution margin

160,000

244,000

334,400

 

 

 

 

Fixed costs:

 

 

 

Manufacturing Overhead

100,000

100,000

100,000

Marketing costs

50,000

50,000

50,000

Total fixed costs

150,000

150,000

150,000

 

 

 

 

Operating income

$10,000

$94,000

$184,400

Revenue & Expenses

The revenue growth rate is consistent and increasing at 10% on the yearly basis. On the other hand the expenses are decreasing at the same rate, the fixed cost remained fixed through the three years but the variable over heads decreased with the same rate,

Growth Rate

The current growth rate in the company is 10% annually.

Competitors

The competitors of the firm are also keeping a eye on the market along with the profitability generated by our firm. They are also trying to follow the same strategies for reduction in the variable overheads while boosting up their sales revenue.

Interest Rates and Tax Rates

Currently all over the world the interest is higher because of the economic recession(Bento & White, 2006). Therefore the tax rates for this firm is also higher as the firm has generated the sales revenue and reduced the variable overheads therefore the firm is generating well enough and moving towards the profitability therefore the interest rates are higher on the other hand firm also has to suffer from the interest rates.

The difference between static and flexible Budget

The static budget is the budget that does not change with the output on the other hand the flexible budget is the budget that changes with the level of the out puts. The flexible budget has though variety of applications on the other hand the static budget has the limited applications(Covaleski et al, 2006). The static budget is the budget that does not change with the variety of the output that is being achieved on the other hand the flexible budget is the budget which is designed with the ...