P24-1B Link Back to Chapter 22 Exhibit 22-7 (page 899). Medix Inc.. produces and sells prepackaged first-aid kits. The company's static budget income statement for August 20X3 fol- lows. It is based on expected sales volume of 55,000 kits. MEDIX, INC. Static Budget Income Statement August 20X3 Sales revenue. $220.000 Variable expenses: Cost of goods sold.. 60,500 Sales commissions. 16.500 Utilities expense 5.500 Fixed expenses: Salary expense 36,500 Depreciation expense. 24,000 Rent expense. 11,500 Utilities expense 6.200 Total expenses. 160,700 $ 59,300 Operating income Medix's plant capacity is 62,500 kits. If actual volume exceeds 62,500 kits, the company must expand the plant. In that case, salaries will increase by 10%. depreciation by 15%. and rent by $6,000. Fixed utilities will be unchanged by any volume increase. Required 1. Prepare flexible budget income statements for the company, showing output levels of 55,000, 60,000, and 65,000 kits. 2. Graph the behavior of the company's total costs. 3. Why might Medix's managers want to see the graph you prepared in requirement 2 as well as the columnar format analysis in requirement 1? What is the disadvantage of the graphic approach?