Question

Required Informatlon [The following Information apples to the questions displayed below. Phoenlx Company's 2017 master budget Included the following fixed budget report. It is based on an expected production and sales volume of 15,000 unlts PHOENIX COMPANY Fixed Budget Report For Year Ended December 31, 2017 Sales Cost of goods sold $3,eee,e00 Direct materials Direct labor Machinery repairs (variable cost) Depreciation-Plant equipment (straight-line) utilities ($30,0e is variable) Plant management salaries $915,eee 21e,eee 60,00 315,8ee 18,eee 200,eee 1,88e,e00 1,12e,000 Gross profit Selling expenses Packaging Shipping Sales salary (fixed annual amount) 75,8e0 90,00 235,eee 400,000 General and administrative expenses Advertising expense Salaries Entertainment expense 1e0,eee 241,8e0 85,8e0 426,800 $ 294,e00 Income from operations 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 mlnus sign.) PHOENIX COMPANY Forecasted Contribution Margin Income Statement For Year Ended December 31, 2017 Sales (in units) Contribution margin (per unit) Contribution margin Fixed costs Operating income (loss) 15,000 12,000

Answer 1

First we shall find contribution per unit.

Contribution = Sales - Variable cost

= $3000000 - ($915000+$210000+$60000+$30000+$75000+$90000)

= $1620000

Contribution per unit = $1620000/15000 = $108 per unit

Fixed cost = $315000+ $150000+ $200000 + $235000 + $426000= $1326000

Particulars
Sales units	15000	12000
Contributiin margin per unit	$108	$108
Contributiin margin	$1620000	$1296000
Fixed cost	$1326000	$1326000
Operating income(loss)	$294000	-$30000