Question

Problem 21-1A Preparing and analyzing a flexible budget LO P1, A1

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Phoenix Company’s 2019 master budget included the following fixed budget report. It is based on an expected production and sales volume of 15,000 units.

PHOENIX COMPANY Fixed Budget Report For Year Ended December 31, 2019
Sales				$	3,150,000
Cost of goods sold
Direct materials	$	900,000
Direct labor		240,000
Machinery repairs (variable cost)		45,000
Depreciation—Plant equipment (straight-line)		315,000
Utilities ($45,000 is variable)		195,000
Plant management salaries		200,000			1,895,000
Gross profit					1,255,000
Selling expenses
Packaging		75,000
Shipping		105,000
Sales salary (fixed annual amount)		235,000			415,000
General and administrative expenses
Advertising expense		150,000
Salaries		241,000
Entertainment expense		90,000			481,000
Income from operations				$	359,000

Problem 21-1A Part 1&2

Required:
1&2. Prepare flexible budgets for the company at sales volumes of 14,000 and 16,000 units and classify all items listed in the fixed budget as variable or fixed.

Answer 1

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Solution: Format and naming convention is not available, can be slightly different: Flexible Budget for Flexible Budget Variable Total Cost Fixed per unit Cost $ 210 14000 2940000 16000 3360000 Particulars Sales Variable Cost per unit: Direct materials Direct labor Machinery repairs Utilities Packaging Shipping $ $ $ 60 16 3 840000 224000 42000 42000 70000 98000 960000 256000 48000 48000 80000 112000 $ $ 5 7 1316000 1624000 1504000 1856000 Total Variable Costs $ 94 Contribution Margin $ 116 Fixed costs: Depreciation - Plant equipment 315000 Utilities 150000 Plant management salaries 200000 sales salary 235000 Advertising 150000 Salaries 241000 Entertainment expense 90000 Total Fixed costs 1381000 Income from operation (CM - Total fixed cost) 315000 150000 200000 235000 150000 241000 90000 1381000 243000 315000 150000 200000 235000 150000 241000 90000 1381000 475000