The Blake Manufacturing Corporation manufactures and sells folding umbrellas. The corporationâ??s…

The Blake Manufacturing Corporation manufactures and sells folding umbrellas. The corporationâ??s…

The Blake Manufacturing Corporation manufactures and sells folding umbrellas. The corporation’s condensed income statement for the year at 31 December 2011 follows:Sales (200,000 units)£1,000,000Cost of goods sold600,000Gross margin400,000Selling expenses£150,000Administrative expenses100,000Net profit (before income taxes)£150,000Blake’s budget committee has estimated the following changes for 2012:30% increase in number of units sold20% increase in material cost per unit15% increase in direct labor cost per unit10% increase in variable indirect cost per unit5% increase in indirect fixed costs8% increase in selling expenses, arising solely from increased volume6% increase in administrative expenses, reflecting anticipated higher wage and supply price levelsAny changes in administrative expenses caused solely by increased sales volume are considered immaterial.Because inventory qualities remain fairly constant, the budget committee considered that for budget purposes any change in inventory valuation can be ignored. The composition of the cost of a unit of finished product during 2011 for materials, direct labor and manufacturing support, respectively, was in the ratio or 3:2:1. In 2011, £40,000 of manufacturing support was for fixed costs. No changes in production methods or credit policies were contemplated for 2012.

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