Question

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 PHOENIX COMPANY Fixed Budget Report For Year Ended December 31, 2017 $3,300,000 $ 975,00 210.000 60,000 315,000 195.000 200,000 1,955,000 1,345,680 Cost of poods sold Direct materials 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 Income from operations 90,eee 105,000 235, 430,000 15e,eee 241,000 80.00 471.0 Problem 21-1A Part 3 3. The company's business conditions are improving. One possible result is a sales volume of 18.000 units. The company president is confident that this volume is within the relevant range of existing capacity. How much would operating income Increase over the 2017 budgeted amount of $444,000 if this level is reached without increasing capacity? PHOENIX COMPANY Forecasted Contribution Margin Income Statement For Year Ended December 31, 2017 Sales (in units) 15.000 18 000 Contribution margin (per unit) Contribution margin Fixed costs Operating income

Answer 1

DATE Page ① Working Notes A Calculation of contribution mergin (per unit) CCM) CM Sales Price - Variable cost per unit sales price $ 3300000 15000 unit $220 per unit was liftes Variable cost = (per unit) a od Direct Material & Dirckt Labor & Machinery repairs & variable Packaging & Shipping number of unit $975000 + $210000 & $60000 it $ 45000 + $ 9oooo + $ 105000) 15000 unit = $1485000 15000 whit = $99 per unit contribution Margin per unit = 220-gg = $121 * Calculation Total fixed of wit fixed cost & Deoreciation + fixed uhlities & Plont Management Falories + sales salary & general and administrative expenses - $ 315000 + $ 150000 +$200000 + $ 239000 + $471000 = $1371000

DATE PAGE forceasted - for Phoenix Company Contribution Margin Income Statement year ended December 31, 2017 a 15000 18000 AY By $ 121 121 - c> sales (in unit) contribution margin o per unit Contribution morgin CAXB) - fixed cost Operating Income $ 1810000 $ 1371000 $ 2178000 $ 1371000 De e $ 444000 $ 807000 Increase in Operating Income = $807000 - $444000 = $ 363000