Reference no: EM13877041

Generating a Flexible Budget Balmer Corporation's master (static) budget for the year is shown below:

Sales (50,000 units) Cost of goods sold: Direct materials	$150,000	$1,600,000
Direct labor	450,000
Overhead (Variable overhead
applied at 40% of direct labor cost)	240,000	840,000
Gross profit		$ 760,000
Selling expenses:
Sales commissions (all variable)	$160,000
Rent (all fixed)	40,000
Insurance (all fixed)	30,000
General expenses:
Salaries (all fixed)	92,000
Rent (all fixed)	77,000
Depreciation (all fixed)	51,000	450,000
Operating income		$ 310,000

Required

1. During the year the company actually manufactured and sold 42,000 units of product. Prepare an Excel spreadsheet that contains a flexible budget for this level of output.

2. Suppose, however, that the actual level of output had been 52,000 units of output. Rerun your spread- sheet to generate a flexible budget for this level of output.

3. Of what relevance is the notion of "relevant range" when preparing pro forma budgets or a flexible budget for control purposes?