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Stellar Packaging Products is experiencing an increase in demand for the month of August as a result of Estrella Coffee's comeback in its retail outlets. The following fact pattern forms the basis for the static budget:
Stellar Packaging Products
Variable Costs Total
Fixed Costs Total
Raw materials
$100,000
Direct manufacturing labor
$125,000
Indirect manufacturing labor
$105,000
Factory Insurance & Utilities
$63,000
Depreciation - Pressroom
$38,500
Repairs and maintenance - factory
$28,000
Selling, marketing & distribution expenses
$40,000
$80,000
General and administrative expenses
$120,000
Variable Cost and Volume Data
Plastic
Raw materials = 0.10 lbs x $2.00/lb.
$0.20
Direct Labor = 0.025 hr x $10/hr.
$0.25
Volume in units
500,000
Sales per unit are $3.00.
Required:
Why is it so subjective and what are the implications to the quality of the income statement?
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