Question

Required information [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 Sales $ 3,150,000 Cost of goods sold Direct materials $ 915,000 Direct labor 225,000 Machinery repairs (variable cost) 60,000 Depreciation—Plant equipment (straight-line) 315,000 Utilities ($45,000 is variable) 195,000 Plant management salaries 220,000 1,930,000 Gross profit 1,220,000 Selling expenses Packaging 75,000 Shipping 105,000 Sales salary (fixed annual amount) 235,000 415,000 General and administrative expenses Advertising expense 125,000 Salaries 241,000 Entertainment expense 75,000 441,000 Income from operations $ 364,000 Required: 1&2. Prepare flexible budgets for the company at sales volumes of 14,000 and 16,000 units and classify all items listed in the fixed budget as variable or fixed.

Fixed Budget Report For Year Ended December 31, 2017 Flexible Budget Variable Amount Total Fixed per Unit Cost Flexible Budget for: Units Sales Unit Sales of of 14,000 16,000 Variable costs 0.00 Fixed costs $ 0 $ 0 $

Answer 1

			Flexible Budget		Flexible budget for:
			Variable	total	unit sales	unit sales
			amount pu	fixed cost	14,000	16,000
Sales			210		2940000	3360000
Variable costs
Direct materials			61		854000	976000
direct labor			15		210000	240000
machinery repairs			4		56000	64000
utilities			3		42000	48000
packaging			5		70000	80000
shipping			7		98000	112000
total variable costs			95		1330000	1520000
contribution margin			115		1610000	1840000
Fixed costs
Depreciation - plant Equipment				315,000	315,000	315,000
Utilities				150000	150000	150000
plant management salaries				220,000	220,000	220,000
Sales salary				235,000	235,000	235,000
Advertising				125,000	125,000	125,000
Salaries				241,000	241,000	241,000
Entertainment expense				75,000	75,000	75,000
total fixed cost				1,361,000	1,361,000	1,361,000
income from operations					249,000	479,000
	forecasted Contribution margin income statement
Sales(in units)			15,000	18,000
Contribution margin (per unit)			115	115
Contribution margin.			1725000	2070000
Fixed costs			1,361,000	1,361,000
operating income			364,000	709,000	345,000	increase
	forecasted Contribution margin income statement
Sales(in units)			15,000	12,000
Contribution margin (per unit)			115	115
Contribution margin.			1725000	1380000
Fixed costs			1,361,000	1,361,000
operating income			364,000	19,000	-345,000	decrease