Answer (D) is correct . A flexible budget is prepared after the budget period has ended and actual sales and costs are known. Assuming that unit sales price ($100,000 ÷ 10,000 units = $10) and variable costs of sales ($60,000 ÷ 10,000 unit = $6) and total fixed costs ($30,000) do not change, a flexible budget may be prepared for the actual sales level (12,000 units). Hence, the budgeted contribution margin (sales – variable costs of sales) equals $48,000 [(12,000 units × $10) – (12,000 units × $6)]. The operating income is therefore $18,000 ($48,000?CM – $30,000 FC).
Answer (A) is incorrect because Assuming that all costs are variable results in $12,000.
Answer (B) is incorrect because The amount of $19,200 is based on actual variable costs.
Answer (C) is incorrect because The amount of $30,000 is based on actual sales revenues.
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The operating income for Clear Plus using a flexible budget for May is
