1. prepare a flexible budget report for 2017.
2. analyze and interpret the (a) sales variance and (b) direct materials cost variance.
Refer to the information in Problem 8-1A. Phoenix Company's actual income statement for 2017 follows. PHOENIX COMPANY Statement of Income from Operations For Year Ended December 31, 2017 $3,648,000 ...... $1,185,000 278,000 63,000 300,000 200,500 210,000 2,236,500 1.411,500 Sales (18,000 units) Cost of goods sold Direct materials .. Direct labor............. Machinery repairs (variable cost)...... Depreciation-Plant equipment ... Utilities (fixed cost is $147,500)..... Plant management salaries...... Gross profit.. Selling expenses Packaging............ Shipping ............ Sales salary (annual) ............ General and administrative expenses Advertising expense .......... Salaries.............. Entertainment expense.......... Income from operations 87,500 118,500 268,000 474,000 132,000 241,000 93,500 466,500 $ 471,000 - Phoenix Company's 2017 master budget included the following fixed budge expected production and sales volume of 15.000 units. connect budget report. It is based on an sis $3.000.000 PHOENIX COMPANY Fred 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 ($45,000 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 .... 1975,000 225,000 60,000 300.000 195,000 200.000 1.955.000 1,045,000 75,000 105,000 250,000 430,000 125.000 241.000 90,000 456,000 $ 159,000 Required 1. Classify all items listed in the fixed budget as variable or fixed. Also determine their amounts per un 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 18,000 units. The company president is confident that this volume is within the relevant range of exist- ing capacity. How much would operating income increase over the 2017 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 2017 could fall to 12,000 units. How much income (or loss) from operations would occur if sales vol- ume falls to this level? hental income statement for 2017 follows
