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10 May, 18:06

New Rock, Inc. sells video games it has purchased from a local distributor. The following static budget is based on sales of 8,000 games. However, New Rock only sold 7,800 games during the year. Fixed costs are 30% of total operating expenses

Sales$512,000Cost of goods sold (variable) 230,000Gross margin282,000Operating expenses220,000Net income$ 62,000

Prepare a flexible budget.

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  1. 10 May, 18:25
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    Solution:

    New Rock, Inc.

    Flexible Budget

    Sales Revenue (7,800 x $64) $499,200

    Cost of Goods Sold (7,800 x $28.75) 224,250

    Gross Profit 274,950

    Variable operating expenses (7,800 x 19.25) 150,150

    Fixed operating expenses ($220,000 x 0.30) 66,000

    Net Income $58,800
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