Question

Problem 23-2A Preparation and analysis of a flexible budget performance report LO P1, P2, A1 Phoenix Company's 2017 master budget included the following fixed budget report. It is based on an expected production and sales volume of 18,000 units. $ 4,050,000 PHOENIX COMPANY Fixed Budget Report For Year Ended December 31, 2017 Sales Cost of goods sold Direct materials $1,080,000 Direct labor 180,000 Machinery repairs (variable cost) 72,000 Depreciation-Plant equipment (straight-line) 330,000 Utilities ($54,000 is variable) 204,000 Plant management salaries 215,000 Gross profit Selling expenses Packaging 90,000 Shipping 126,000 Sales salary (fixed annual amount) 260,000 General and administrative expenses Advertising expense 128,000 Salaries 261,000 Entertainment expense 90,000 Income from operations 2,081,000 1,969,000 476,000 479,000 $1,014,000 Phoenix Company's actual income statement for 2017 follows. $ 4,803,000 PHOENIX COMPANY Statement of Income from Operations For Year Ended December 31, 2017 Sales (21,000 units) Cost of goods sold Direct materials $1,275,000 Direct labor 218,000 Machinery repairs (variable cost) 76,000 Depreciation-Plant equipment (straight-line) 330,000 Utilities (fixed cost is $147,500) 210,000 Plant management salaries 225,000 Gross profit Selling expenses Packaging 102,750 Shipping 139,500 Sales salary (annual) 279,000 General and administrative expenses Advertising expense 137,000 Salaries 261,000 Entertainment expense 94,000 Income from operations 2,334,000 2,469,000 521,250 492,000 $ 1,455, 750

Answer 1

РHOENIX COM PANY Flexible Budget Performance Report For Year Ended December 31, 2017 Flexible Fav. /Unfav. Actual Results Variances Budget $4,725,000 $ 4,803,000 $ Sales (21,000 $225.00) Variable Costs Direct Materia ls (21,000* $60.00) Direct Labor (21,000* $10.00) Machinery Repairs (21,000 $4.00) Utilities (21,000 * $3.00) Packaging (21,000 * $5.00) Shipping (21,000 $7.00) Total Variable Costs Contribution Margin Fixed Costs: 78,000 Favorable $1,260,000 $ 1,275,000 $ 210,000 $ 84,000 $ 63,000 $ 105,000 $ $ 15,000 Unfavorable 218,000 $ 76,000 $ 62,500 $ 102,750 $ 8,000 Unfavorable Favorable 8,000 500 Favorable Favorable 2,250 147,000 $ $1,869,000 $ 1,873,750$ $2,856,000 $ 2,929,250 $ Favorable 139,500 7,500 Unfavorable 4,750 73,250 Favorable Depreciation-Plant Equipment 330,000 $ $ 330,000 $ 147,500 $ 225,000 $ 279,000 $ 137,000 $ 261,000 $ 94,000 $ $ Favorable 150,000 $ $ Utilities Favorable 2,500 Plant Management Salaries Sales Salary Advertising 215,000 $ $ 10,000 Unfavorable 260,000 $ $ 19,000 Unfavorable 128,000 $ 261,000 $ $ 9,000 Unfavorable Salaries Favorable Entertainment Expense 90,000 $ $1434,000 $ 1,473,500$ $1422,000 $ 1,455,750$ Unfavorable 4,000 Total Fixed Costs Unfavorable 39,500 Favorable Income from Operations 33,750

Planning Budget:

Selling Price per unit = Sales / Sales Volume
Selling Price per unit = $4,050,000 / 18,000
Selling Price per unit = $225.00

Direct Materials per unit = Direct Materials / Sales Volume
Direct Materials per unit = $1,080,000 / 18,000
Direct Materials per unit = $60.00

Direct Labor per unit = Direct Labor / Sales Volume
Direct Labor per unit = $180,000 / 18,000
Direct Labor per unit = $10.00

Machinery Repairs per unit = Machinery Repairs / Sales Volume
Machinery Repairs per unit = $72,000 / 18,000
Machinery Repairs per unit = $4.00

Utilities per unit = Utilities / Sales Volume
Utilities per unit = $54,000 / 18,000
Utilities per unit = $3.00

Packaging per unit = Packaging / Sales Volume
Packaging per unit = $90,000 / 18,000
Packaging per unit = $5.00

Shipping per unit = Shipping / Sales Volume
Shipping per unit = $126,000 / 18,000
Shipping per unit = $7.00