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E10-7 Kitchen Help Inc. (KHI)

Price: $1.99


E10-7 Kitchen Help Inc. (KHI) is a manufacturer of toaster ovens. To improve control
over operations, the president of KHI wants to begin using a flexible budgeting system,
rather than use only the current master budget. The following data are available for KHI’s
expected costs at production levels of 90,000, 100,000, and 110,000 units.


Variable costs 
Manufacturing  $6 per unit 
Administrative  $4 per unit 
Selling  $2 per unit 
Fixed costs
 Manufacturing  $160,000
Administrative  $80,000

Instructions
(a) Prepare a flexible budget for each of the possible production levels: 90,000, 100,000,
and 110,000 units.
(b) If KHI sells the toaster ovens for $16 each, how many units will it have to sell to make
a profit of $200,000 before taxes?

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