Question

Check m Utilities ($3e, eee is variable) Plant management salaries Gross profit Selling expenses Packaging Shipping Sales salary (fixed annual amount) General and administrative expenses Advertising expense Salaries 195,000 210,000 1,950,e00 1,2e0,000 75,000, 90,000 235,e00 460, ee0 100,000 230,000 8e,000 Entertainment expense 410,000 Income from operations $ 390,000 4. An unfavorable change in business is remotely possible; in this case, production and sales volume for the year 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.) PHOENIX COMPANY Forecasted Contribution Margin Income Statement For Year Ended December 31, 2019 Sales (in units) 15,000 12,000 Contribution margin (per unit) Contribution margin Fixed costs Operating income (loss)

Answer 1

Solution

PHOENIX COMPANY
Forcasted Contribution margin Income Statement
For the year ended December 31, 2017
Sales(in units)	15000	12000
Contribution margin per unit	$ 115.00	$ 115.00
Contribution margin	$ 1,725,000.00	$ 1,380,000.00
Fixed cost	$ 1,335,000.00	$ 1,335,000.00
Operating income	$      390,000.00	$        45,000.00

Working

PHOENIX COMPANY
Flexible Budget report
For year ended December 31, 2017
	Flexibla budget		Flexible budget for
	variable Amount per Unit	Total Fixed cost		14000 units	16000 units
Sales	$ 210			$ 3,150,000	$ 2,520,000
Variable costs
Direct material	$ 64			$ 960,000	$ 768,000
Direct Labor	$ 14			$ 210,000	$ 168,000
Machinery repairs	$ 4			$ 60,000	$ 48,000
Utilities	$ 2			$ 30,000	$ 24,000
Packaging	$ 5			$ 75,000	$ 60,000
Shipping	$ 6			$ 90,000	$ 72,000
Total Variable Coists	$ 95			$ 1,425,000	$ 1,140,000
Contribution margin	$ 115			$ 1,725,000	$ 1,380,000
Fixed costs
Depreciation- Plant equipment		$ 315,000		$ 315,000	$ 315,000
Utilities		$ 165,000		$ 165,000	$ 165,000
Plant management salaries		$ 210,000		$ 210,000	$ 210,000
Sales salaries		$ 235,000		$ 235,000	$ 235,000
Advertising expenses		$ 100,000		$ 100,000	$ 100,000
Salaries		$ 230,000		$ 230,000	$ 230,000
Entertainment expenses		$ 80,000		$ 80,000	$ 80,000
Total Fixed costs		$ 1,335,000		$ 1,335,000	$ 1,335,000
Income from Operations				$ 390,000	$ 45,000