The master budget at Western Company last period called for sales of 235,000 units at $9.40 each. The costs were estimated to be $3.00 variable per unit and $270,000 fixed. During the period, actual production and actual sales were 240,000 units. The selling price was $9.50 per unit. Variable costs were $3.75 per unit. Actual fixed costs were $270,000. Required: Prepare a flexible budget for Western.

Profit under flexible budget =  $1,266,000  (please  budget below)                                                

Explanation:

Flexible budget is that which is that which recognizes the cost behavior and is used for control purpose. It is prepared based on the actual level of activity achieved using the assumptions of the static budget.

So we will prepare a flexible budget for Western Company for 240,000 units using the assumption of the static budget.

                                Flexible Budget

                                                                                 $

Sales Revenue    (240,000× $9.40) =               2,256,000  

Variable cost      (240,000×  $3.00) =               ( 720,000 )

Contribution                                                          1,536,000

Fixed cost                                                            (270,000)

Profit                                                                  1,266,000

answer makes less frequent trips to the bank and firms make less frequent price changes;