Question

Phoenix Company’s 2017 master budget included the following fixed budget report. It is based on an expected production and sales volume of 15,000 units.

Required information Problem 21-1A Preparation and analysis of a flexible budget LO P1 (The following information applies to the questions displayed below.) Phoenix Company's 2017 master budget included the following fixed budget report. It is based on an expected production and sales volume of 15,000 units. $3,300,000 PHOENIX COMPANY Fixed Budget Report For Year Ended December 31, 2017 Sales Cost of goods sold Direct materials $ 915,000 Direct labor 240,000 Machinery repairs (variable cost) 60,000 Depreciation-Plant equipment (straight-line) 300,000 Utilities ($30,000 is variable) 195,000 Plant management salaries 200,000 Gross profit Selling expenses Packaging 75,000 Shipping 105,000 Sales salary (fixed annual amount) 235,000 General and administrative expenses Advertising expense 125,000 Salaries 241,000 Entertainment expense 80,000 Income from operations 1,910,000 1,390,000 415,000 446,000 529,000 $

Answer 1

	Fixed Budget Report
	For Year Ended December 31, 2017
	Flexible Budget		Flexible Budget for:
	Variable Amount per Unit	Total Fixed Cost	Units Sales of 14,000	Unit Sales of 16,000
Sales	220		3080000	3520000
Variable costs:
Direct materials	61		854000	976000
Direct labor	16		224000	256000
Machinery repairs	4		56000	64000
Utilities	2		28000	32000
Packaging	5		70000	80000
Shipping	7		98000	112000
Total variable costs	95		1330000	1520000
Contribution margin	125		1750000	2000000
Fixed costs
Depreciation—Plant equipment (straight-line)		300000	300000	300000
Advertising expense		125000	125000	125000
Entertainment expense		80000	80000	80000
Plant management salaries		200000	200000	200000
Utilities		165000	165000	165000
Sales salary		235000	235000	235000
Salaries		241000	241000	241000
Total fixed costs		1346000	1346000	1346000
Income from operations			404000	654000
3
Forecasted Contribution Margin Income Statement
For Year ended December 31,2017
Sales (in units)	15000	18000
Contribution margin (per unit)	125	125
Contribution margin	1875000	2250000
Fixed costs	1346000	1346000
Operating income	529000	904000	375000	Operating income increase
4
Forecasted Contribution Margin Income Statement
For Year ended December 31,2017
Sales (in units)	15000	12000
Contribution margin (per unit)	125	125
Contribution margin	1875000	1500000
Fixed costs	1346000	1346000
Operating income	529000	154000