Question

Help Save & Required information (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 Yor Year Ended December 31, 2017 Sales Cost of goods sold Direct materials $945,000 Direct labor 225,000 Machinery repairs (variable cost) 45,000 Depreciation-plant equipment straight-line) 300.000 Utilities (345,000 8 Variable) 210,000 Plant management salaries 200,000 Gross profit Selling expenses Packaging 75,000 Shipping 50.000 Sales salary tixed annual amount 25.000 General and administrative expenses Advertising expense 125.000 Salaries 230,000 Entertainment expense 15.000 Incontro operations 1,925,000 1.225.000 400,000 40.000 385.000 $ 3. The company's business conditions are improving. One possible result is a sales volume of 18 000 units. The company president is confident that this volume is within the relevant range of existing capacity. How much would operating income increase over the 2017 budgeted amount of $385,000 if this level is reached without in

Answer 1

Solution

PHOENIX COMPANY
Forecasted Contribution margin Income Statement
For the year ended December 31, 2017
Sales(in units)	15000	18000
Contribution margin per unit	$              115.00	$              115.00
Contribution margin	$ 1,725,000.00	$ 2,070,000.00
Fixed cost	$ 1,340,000.00	$ 1,340,000.00
Operating income	$      385,000.00	$      730,000.00	$ 345,000	Operating income increase

Working

PHOENIX COMPANY
Flexible Budget report
For year ended December 31, 2017
	Flexibla budget		Flexible budget for
	variable Amount per Unit	Total Fixed cost		15000 units	12000 units
Sales	$ 210			$ 3,150,000	$ 3,780,000
Variable costs
Direct material	$ 63			$ 945,000	$ 1,134,000
Direct Labor	$ 15			$ 225,000	$ 270,000
Machinery repairs	$ 3			$ 45,000	$ 54,000
Utilities	$ 3			$ 45,000	$ 54,000
Packaging	$ 5			$ 75,000	$ 90,000
Shipping	$ 6			$ 90,000	$ 108,000
Total Variable Coists	$ 95			$ 1,425,000	$ 1,710,000
Contribution margin	$ 115			$ 1,725,000	$ 2,070,000
Fixed costs
Depreciation- Plant equipment		$ 300,000		$ 300,000	$ 300,000
Utilities		$ 165,000		$ 165,000	$ 165,000
Plant management salaries		$ 200,000		$ 200,000	$ 200,000
Sales salaries		$ 235,000		$ 235,000	$ 235,000
Advertising expenses		$ 125,000		$ 125,000	$ 125,000
Salaries		$ 230,000		$ 230,000	$ 230,000
Entertainment expenses		$ 85,000		$ 85,000	$ 85,000
Total Fixed costs		$ 1,340,000		$ 1,340,000	$ 1,340,000
Income from Operations				$ 385,000	$ 730,000