Question

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	$	900,000
Direct labor		210,000
Machinery repairs (variable cost)		60,000
Depreciation—Plant equipment (straight-line)		300,000
Utilities ($45,000 is variable)		195,000
Plant management salaries		190,000			1,855,000
Gross profit					1,295,000
Selling expenses
Packaging		75,000
Shipping		90,000
Sales salary (fixed annual amount)		235,000			400,000
General and administrative expenses
Advertising expense		100,000
Salaries		230,000
Entertainment expense		90,000			420,000
Income from operations				$	475,000

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.

Answer 1

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packaging PHOENIX COMPANY flexible Budgets for Year Ended December 31, 2017 | Plexible Budget Flexible Budget for! Variable Total Tunits sales Tumits sales Amount I fixed cost of 14,070 16,000 per unit 1 sales Q10 422,940,000 $3,360,000 Variable Costs Direct materials 840,000 960,000 Direct labore 196,000 294,070 Machinery weepairs 56,060 64,000 Utilities 48.000 48,000 70,070 80,000 shipping 84,000 96,000 Tosat Variable costs $ 1288,000 $1472,000 I contribution Marlen 1652,000 1888,000 Rixed Costs Depreciation - Plant equipment 300,000 300,000 300,000 Utilities 150,000 | 150,000 150,000 I plant mangement salaries 190,000 190.000 190,000 sales salary 2235,000 235,000 235,000 Advertising 100,000 100.000 100.000 Salaries 230,000 230,000 230,000 Entertainment Expense 90,000 | 90.000 90.000 - Total fixed costs $1295000 $1495,000 $1295,000 | Income from operations $357,000 $593,000