Question

Phoenix Company's 2017 master budget included the following fixed budget report. It is based on an expected production and sales volume of 17.000 units. $4,250,000 PHOENIX COMPANY Fixed Budget Report For Year Ended December 31, 2017 Sales Cost of goods sold Direct materials $1,020,000 Direct labor 255,000 Machinery repairs (variable cost) 68,000 Depreciation-Plant equipment (straight- 300,000 line) Utilities ($51,000 is variable) 201,000 Plant management salaries 230,000 Gross profit Selling expenses Packaging 85,000 Shipping 119,000 Sales salary (fixed annual amount) 270,000 General and administrative expenses Advertising expense 128,000 Salaries 241,000 Entertainment expense 100,000 Income from operations 2,074,000 2,176,000 474,000 469,000 $1,233,000

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Solution: Note: Naming convention of Fav. / Unfav. Can be slightly different per question requirement. Generally, these are denoted as "F" and "U" and "None"-for no variance. Flexible Budget Performance Report Flexible Actual Variance Fav./Unf. Budget Result Sales (4250000/17000)*20000 5000000 5048000 48000 Favorable Variable Cost per unit: Direct materials (cost/17000)*20000 1200000 1216000 16000 Unfavorable Direct labor 300000 308000 8000 Unfavorable Machinery repairs 80000 71000 9000 Favorable Utilities 60000 59250 750 Favorable Packaging 100000 97750 2250 Favorable Shipping 140000 132500 7500 Favorable Total Variable Costs 1880000 1884500 4500 Unfavorable Contribution Margin 3120000 3163500 43500 Favorable Fixed costs: Depreciation - Plant equipment 300000 300000 O None Utilities (201000-51000) 150000 147000 3000 Favorable Plant management salaries 230000 240000 10000 Unfavorable sales salary 270000 286000 16000 Unfavorable Advertising 128000 137000 9000 Unfavorable Salaries 241000241000 0 None Entertainment expense 100000 103500 3500 Unfavorable Total Fixed Costs Income From Operation 1419000 1454500 1701000 1709000 35500 Unfavorable 8 000 Favorable