Refer to information in Problem 23-1 A.

Required Compute these variances:

(a) variable overhead spending and efficiency,

(b) fixed overhead spending and volume, and

(c) total overhead controllable.

Phoenix Company’s 2013 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 23.3) 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 2013 budgeted amount of $159,000 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 2013 could fall to 12,000 units. How much income (or loss) from operations would occur if sales volume falls to this level?

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PHOENIX COMPANY Fixed Budget Report For Year Ended December 31, 2013 Sales $3,000,000 Cost of goods sold Direct materials.. $975,000 Direct labor.... 225,000 Machinery repairs (variable cost) Depreciation-plant equipment. Utilities ($45,000 is variable) 60,000 300,000 195,000 Plant management salaries 200,000 1,955,000 Gross profit. 1,045,000 Selling expenses Packaging 75,000 Shipping 105,000 Sales salary (fixed annual amount) 250,000 430,000 General and administrative expenses Advertising expense 125,000 Salaries..... 241,000 Entertainment expense. 90,000 456,000 Income from operations $ 159,000