Question

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Required information Problem 23-1A 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. $3,000,000 PHOENIX COMPANY Fixed Budget Report For Year Ended December 31, 2017 Sales Cost of goods sold Direct materials $975,000 Direct labor 210,000 Machinery repairs (variable cost) 60,000 Depreciation-Plant equipment (straight-line) 330,000 Utilities ($60,000 is variable) 180,000 Plant management salaries 200,000 Gross profit Selling expenses Packaging 75,000 Shipping 105,000 Sales salary (fixed annual amount) 235,000 General and administrative expenses Advertising expense 125,000 Salaries 241,000 Entertainment expense 90,000 Income from operations 1,955,000 1,045,000 415,000 456,000 174,000 $

Answer 1

			Flexible Budget		Flexible budget for:
			Variable	total	unit sales	unit sales
			amount pu	fixed cost	14,000	16,000
Sales			200		2800000	3200000
Variable costs
Direct materials			65		910000	1040000
direct labor			14		196000	224000
machinery repairs			4		56000	64000
utilities			4		56000	64000
packaging			5		70000	80000
shipping			7		98000	112000
total variable costs			99		1386000	1584000
contribution margin			101		1414000	1616000
Fixed costs
Depreciation - plant Equipment				330,000	330,000	330,000
Utilities				120000	120000	120000
plant management salaries				200,000	200,000	200,000
Sales salary				235,000	235,000	235,000
Advertising				125,000	125,000	125,000
Salaries				241,000	241,000	241,000
Entertainment expense				90,000	90,000	90,000
total fixed cost				1,341,000	1,341,000	1,341,000
income from operations					73,000	275,000
	forecasted Contribution margin income statement
Sales(in units)			15,000	18,000
Contribution margin (per unit)			101	101
Contribution margin.			1515000	1818000
Fixed costs			1,341,000	1,341,000
operating income			174,000	477,000	303,000	increase
	forecasted Contribution margin income statement
Sales(in units)			15,000	12,000
Contribution margin (per unit)			101	101
Contribution margin.			1515000	1212000
Fixed costs			1,341,000	1,341,000
operating income			174,000	-129,000	-303,000	decrease