Phoenix Company’s 2019 master budget included the following fixed budget report. It is based on an expected productionand 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 theyear, 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 18,000 units. The company presidentis confident that this volume is within the relevant range of existing capacity. How much would operating income increase overthe 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 the year could fall to12,000 units. How much income (or loss) from operations would occur if sales volume falls to this level?

Transcribed Image Text:

Fixed Budget Report For Year Ended December 31, 2019 $3,000,000 Sales .. Cost of goods sold Direct materials ... Direct labor..... Machinery repairs (variable cost) $975,000 225,000 60,000 Depreciation-Plant equipment (straight-line) . Utilities ($45,000 is variable) . 300,000 195,000 Plant management salaries 200,000 1,955,000 Gross profit.... 1,045,000 Selling expenses Packaging.. 75,000 Shipping... Sales salary (fixed annual amount). 105,000 430,000 250,000 General and administrative expenses Advertising expense 125,000 Salaries..... 241,000 Entertainment expense. 90,000 456,000 $ 159,000 Income from operations