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. PHOENIX COMPANY Fixed Budget Report For Year Ended December 31, 2017 $3,150,000 Sales Cost of goods sold Direct materials $960,000 225,000 45,000 300,000 195,000 180,000 Direct labor Machinery repairs (variable cost) Depreciation-Plant equipment (straight-line) Utilities ($45,000 is variable) Plant management salaries Gross profit Selling expenses Packaging Shipping Sales salary (fixed annual amount) General and administrative expenses Advertising expense Salaries Entertainment expense 1,905.000 1,245,000 90,000 90,000 235,000 415,000 150,000 241,000 75,000 466,000 $ 364,000 Income from operations

Answer 1

Solution 3:

Phoenix Company
Flexible Budget for 2017
Particulars	Flexible Budget		Flexible Budget For
	Variable amount per unit	Total Fixed Cost	Volume - 14000 units	Volume - 16000 units
Sales	$210.00		$2,940,000.00	$3,360,000.00
Variable costs:
Direct materials	$64.00		$896,000.00	$1,024,000.00
Direct labor	$15.00		$210,000.00	$240,000.00
Machinery repairs	$3.00		$42,000.00	$48,000.00
Utilities	$3.00		$42,000.00	$48,000.00
Packaging	$6.00		$84,000.00	$96,000.00
Shipping	$6.00		$84,000.00	$96,000.00
Total Variable costs	$97.00		$1,358,000.00	$1,552,000.00
Contribution margin	$113.00		$1,582,000.00	$1,808,000.00
Fixed Costs:
Depreciation—Plant equipment		$300,000.00	$300,000.00	$300,000.00
Utilities		$150,000.00	$150,000.00	$150,000.00
Plant management salaries		$180,000.00	$180,000.00	$180,000.00
Sales Salaries		$235,000.00	$235,000.00	$235,000.00
Advertising expense		$150,000.00	$150,000.00	$150,000.00
Salaries		$241,000.00	$241,000.00	$241,000.00
Entertainment expense		$75,000.00	$75,000.00	$75,000.00
Total Fixed Costs		$1,331,000.00	$1,331,000.00	$1,331,000.00
Net Operating Income			$251,000.00	$477,000.00

Phoenix Company
Forecasted contribution margin income statement
For the year ended December 31, 2017
Sales (In units)	15000	18000
Contribution margin per unit	$113.00	$113.00
Contribution margin	$1,695,000.00	$2,034,000.00
Fixed costs	$1,331,000.00	$1,331,000.00
Operating income (Loss)	$364,000.00	$703,000.00	$339,000.00	Increase in income