Flexible Budgets and Standard Costs PROBLEM SET A Phoenix Company's 2017 master budget included the following fixed budget report. It is based on an expected production and sales volume of 15,000 units. connect 4- Problem 21-1A Preparation and analysis of a flexible budget P1 PHOENIX COMPANY Fixed Budget Report For Year Ended December 31, 2017 2 $3,000,000 $975,000 225.000 60.000 300,000 195.000 200,000 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 1.955,000 1,045,000 75,000 105,000 250.000 430,000 125,000 241,000 90,000 455.000 $ 159,000 Check (2) Budgeted income at 16,000 units, $260,000 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 21.3) 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? (4) Potential operating loss, $(144,000) Com 211 Phonix Commy's actual income statement for 2017 follows