Question

Phoenix Company’s 2017 master budget included the following fixed budget report. It is based on an expected production and sales volume of 17,000 units.

$4,250,000 PHOENIX COMPANY Fixed Budget Report For Year Ended December 31, 2017 Sales Cost of goods sold Direct materials Direct labor Machinery repairs (variable cost) Depreciation-Plant equipment (straight-line) Utilities ($34,000 is variable) Plant management salaries Gross profit Selling expenses Packaging Shipping Sales salary (fixed annual amount) General and administrative expenses Advertising expense Salaries Entertainment expense Income from operations $1,020,000 170,000 51,000 330,000 184,000 215,000 1,970,000 2,280,000 68,000 102,000 270,000 440,000 131,000 241,000 90,000 462,000 $1,378,000

Phoenix Company’s actual income statement for 2017 follows.

Answer 1

PHOENIX COMPANY Flexible Budget Performance Report For Year Ended December 31, 2017 Flexible budget 5000000 Actual results I 5063000 Variance Fav./Unfav. 63000 Favorable sales Variable costs Direct materials Direct labor Machinery repairs (variable cost) Utilities Packaging Shipping 1200000 200000 60000 40000 80000 120000 1217000 208000 51000 39500 77750 112500 17000 Unfavorable 8000 Unfavorable 9000 Favorable 500 Favorable 2250 Favorable 7500 Favorable 1700000 3300000 1705750 3357250 5750 Unfavorable 57250 Favorable Total Variable costs contribution margin Fixed costs Depreciation-plant equipment (straight-line) Utilities Plant management salaries Sales salary (fixed annual amount) Advertising expense Salaries Entertainment expense 330000 150000 215000 270000 131000 241000 90000 330000 147500 224000 288000 139,000 241,000 94,000 O None 2500 Favorable 9000 Unfavorable 18000 Unfavorable 8000 Unfavorable O None 4000 Unfavorable Total fixed cost income from operations 1427000 1873000 1463500 1893750 36500 Unfavorable 20750 Favorable

working: PHOENIX COMPANY Flexible Budget For Year Ended December 31, 2017 Flexible budget variable amount per unit Total fixed cost Flexible budget for units sale of 20000 5000000 sales 250 Variable costs Direct materials Direct labor Machinery repairs (variable co st) Utilities Packaging Shipping 1200000 200000 60000 40000 80000 120000 1700000 3300000 165 Total Variable costs contribution margin Fixed costs Depreciation-plant equipment (straight-line) Utilities (184000 34000) Plant management salaries Sales salary (fixed annual amount) Advertising expense Salaries Entertainment expense 330000 150000 215000 270000 131,000 241,000 90,000 330000 150000 215000 270000 131000 241000 90000 1427000 Total fixed cost income from operations 1427000 1873000 Sales Direct materials Direct labor Machinery repairs (variable co st) Utilities Packaging Shipping Fixed budget amount variable amount per unit Flexible amount b=a/17000 c=b*20000 4250000 5000000 1020000 1200000 170000 200000 51000 60000 34000 40000 68000 80000 102000 120000