Question

[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. 3.150.000 PHOENIX COMPANY Fixed Budget Report For Year Ended December 31, 2017 Sales Cost of goods sold Direct materials Direct labor Machinery repairs (variable cost) Depreciation-Plant equipment straight-line) Utilities ($60,000 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 $ 960,000 210,000 45.000 300.000 195.000 210,000 1920.000 1230.000 75.000 105,000 235.000 455.000 100.000 230 000 30.000 410,000 $ 405.000 3. Award: 33.34 points 4. An unfavorable change in business is remotely possible; in this case, production and sales volume for 2017 could fall to 12,000 units. How much income (or loss) from operations would occur if sales volume falls to this level? (Enter any loss with minus sign.) 12.000 PHOENIX COMPANY Forecasted Contribution Margin Income Statement For Year Ended December 31, 2017 Sales in units) 15.000 Contribution margin (per unit) Contribution margin Fixed costs Operating income (loss)

Answer 1

PHOENIX COMPANY Forecasted Contribution Margin Income Statement For the year ended December 31,2017
Sales (in units)	15,000	12,000
x Contribution margin (per unit)	$ 113	$ 113
Contribution margin	$ 1,695,000	$ 1,356,000
Less: Fixed costs	($ 1,290,000)	($ 1,290,000)
Operating income (loss)	$ 405,000	$ 66,000

Workings :
Particulars	Per Unit (in $ )
Sales ( $ 3,150,000 / 15,000 units )	$ 210
Less: Variable costs
Direct materials        ( $ 960,000 / 15,000 units )	$ 64
Direct labor        ( $ 210,000 / 15,000 units )	$ 14
Machinery repairs        ( $ 45,000 / 15,000 units )	$ 3
Utilities        ( $ 60,000 / 15,000 units )	$ 4
Packaging        ( $ 75,000 / 15,000 units )	$ 5
Shipping        ( $ 105,000 / 15,000 units )	$ 7
Total Variable costs	$ 97
Contribution margin per unit ( $ 210 (-)$ 97 )	$ 113
Particulars	Amount (in $ )
Depreciation- Plant equipment	$ 300,000
Utilities ( $ 195,000 (-) $ 60,000 )	$ 135,000
Plant management salaries	$ 210,000
Sales Salary	$ 235,000
Advertising expense	$ 100,000
Salaries	$ 230,000
Entertainment expense	$ 80,000
Total Fixed Costs	$ 1,290,000