Question

Phoenix Company's 2019 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, 2019 Sales Cost of goods sold Direct materials $975,000 Direct labor 225,000 Machinery repairs (variable cost) 60,000 Depreciation-Plant equipment (straight-line) 300,000 Utilities ($45,000 is variable) 195,000 Plant management salaries 200,000 Gross profit Selling expenses Packaging 75,000 Shipping 105,000 Sales salary (fixed annual amount) 250,000 General and administrative expenses Advertising expense 125,000 Salaries 241,000 Entertainment expense 90,000 Income from operations 1,955,000 1,045,000 430,000 456,000 159,000 $

Answer 1

Solution:

Phoenix Company
Flexible Budget Performance Report
For the year ended Dec 31, 2019
Particulars	Flexible Budget	Actual results	Variances	Fav. / Unfav.
Sales	$3,600,000.00	$3,648,000.00	$48,000.00	Favorable
Variable Costs:
Direct Materials	$1,170,000.00	$1,185,000.00	$15,000.00	Unfavorable
Direct Labor	$270,000.00	$278,000.00	$8,000.00	Unfavorable
Machinery Repairs	$72,000.00	$63,000.00	$9,000.00	Favorable
Utilities	$54,000.00	$53,000.00	$1,000.00	Favorable
Packaging	$90,000.00	$87,500.00	$2,500.00	Favorable
Shipping	$126,000.00	$118,500.00	$7,500.00	Favorable
Total Variable Costs:	$1,782,000.00	$1,785,000.00	$3,000.00	Unfavorable
Contribution	$1,818,000.00	$1,863,000.00	$45,000.00	Favorable
Fixed Costs:
Depreciation - Plant & Equipment	$300,000.00	$300,000.00	$0.00	Neither favorable nor unfavorable
Utilities	$150,000.00	$147,500.00	$2,500.00	Favorable
Plant mangement salaries	$200,000.00	$210,000.00	$10,000.00	Unfavorable
Sales Salary	$250,000.00	$268,000.00	$18,000.00	Unfavorable
Advertising Expense	$125,000.00	$132,000.00	$7,000.00	Unfavorable
Salaries	$241,000.00	$241,000.00	$0.00	Neither favorable nor unfavorable
Entertainment Expenses	$90,000.00	$93,500.00	$3,500.00	Unfavorable
Total Fixed Costs	$1,356,000.00	$1,392,000.00	$36,000.00	Unfavorable
Net Operating Income	$462,000.00	$471,000.00	$9,000.00	Favorable