Major Company's 2009 master budget included the following fixed budget report. It is based on an expected production and sales volume of 15,000 units.

Required
1. Classify all items listed in the fixed budget as variable or fixed. Also determine their amounts per unit or their amounts for the year, as appropriate.
2. Prepare flexible budgets (see Exhibit 8.3) for the company at sales volumes of 14,000 and 16,000 units.
3. The company's business conditions are improving. One possible result is a sales volume of approximately 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 2009 budgeted amount of $509,000 if this level is reached without increasing capacity?
4. An unfavorable change in business is remotely possible; in this case, production and sales volume for 2009 could fall to 12,000 units. How much income (or loss) from operations would occur if sales volume falls to thislevel?

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MAJOR COMPANY Flxed Budget Report For Year Ended December 31, 2009 $3.300,000 Cost of goods sold Direct materlals.----..-.. ..$960,000 Machinery repairs (variable cost) 60,000 300,000 180,000 Plant management salaries - 210,000 1.950,000 Gross profit Selling expenses 1,350,000 Packaging Shipping Sales salary (fxed annual amount). 75,000 05,000 235,000 415,000 General and administrative expenses Advertising expense.100,000 85,000 426,000 $ 509,000 Income from operations