Help with A on the bottom please.
Phoenix Company's 2019 master budget included the following fixed budget report. It is based on an expected production and sales volume of16,000 units. PHOENIX COMPANY Fixed Budget Report For Year Ended December 31. 2019 Sales $3,600,000 Cost of goods sold Direct materials $960,000 Direct labor 240,000 Machinery repairs (variable cost) 64,000 DepreciationPlant equipment (straightline) 315,000 Utilities ($48,000 is variable) 198,000 Plant management salaries 230,000 2,007,000 Gross profit 1,593,000 Selling expenses Packaging 80,000 Shipping 112,000 Sales salary (fixed annual amount) 260,000 452,000 General and administrative expenses Advertising expense 133,000 Salaries 251,000 Entertainment expense 100,000 484,000 Income from operations $ 657,000 Phoenix Company's actual income statement for 2019 follows. PHOENIX COMPANY Statement of Income from Operations For Year Ended December 31, 2019 Sales (19,000 units) $4,338,000 Cost of goods sold Direct materials $1,156,000 Direct labor 293,000 Machinery repairs (variable cost) 67,000 DepreciationPlant equipment (straightline) 315,000 Utilities (fixed cost is $147,500) 203,750 Plant management salaries 240,000 2,274,750 Gross profit 2,063,250 Selling expenses Packaging 92,000 Shipping 126,000 Sales salary (annual) 276,000 494,000 General and administrative expenses Advertising expense 141,000 Salaries 251,000 Entertainment expense 103,000 495,000 Income from operations $1.074.250 Requhed: 1. Prepare a flexible budget performance report for 2019. (Indicate the effect of each variance by selecting for favorable, unfavorable, and No variance.) a. Management believes the lower priced material has contributed to the unfavorable material quantity variance. The purchasing department wants to know what price per paund of raw material they sh0uld pay to fully offset the unfavorable material quantity variance they saw last year. Calculate the price. Hint Use MPV = (SP- AP)AQ; Set material price variance to favorable (positive) amount equal to the quantity variance calculated in 20. Use the SP from standard cost card in 1 and actual quantity of raw material and solve for AP, actual price). Management would like to set this as their standard raw material price per input for next year. Include the amount in NEXT YEAR's standard cost card below in the highlighted cell. \\I 2) With respect to direct material, calculate the following relating to their operating results for the year. Assume Phoenix Company paid an average of $15.00 (actual price, AP) a pound for its raw material during the year. How many pounds of raw material did they use? Hint: Actual direct material expenses (connect income statement) divided by 15. Round to the nearest whole number of pounds. Use this as your actual quantity, AQ, for the calculation of DM variances below. Direct materials per income statement 1,156,000 Divided by cost of direct materials per pound 15 Actual quantity of direct materials used 77,067 pounds b) Using the standard cost card and the flexible budget, how many pounds should Phoenix Company have used? Round to the nearest whole number of pounds. Use this as standard quantity, SQ, for the calculations of DM variances below. Actual numbers of units sold 19,000 Multiplied by standard pounds per unit sold 4 Standard quantity of direct materials to be used 76,000 c) Complete the following table to calculate the direct material price and quantity variances. Direct Material Variances Actual Cost Standard Cost AQ X AP AQ X SP SQ SP 77,067 X 15 19,000.00 x 60.00 76,000 X 15 1,156,000 1,156,000 1,140,000 16,000.00) (180,000.00) Favorable/Unfavorable Direct material price variance 0 Direct material quantity variance 16,000 unfavorable Total direct material variance 16,000 Unfavorable1) Phoenix Company budget amounts are prepared using standards. Follow the instructions provided in (a) through (e) to complete the Standard Card below. Direct materials Direct labor Variable Overhead
