PHOENIX COMPANY Fixed Budget Report For Year Ended December 31, 2015 Sales $ 3,150,000 Cost of goods sold $ 930,000 Direct materials Direct labor 225,000 Machinery repairs (variable cost) Depreciation-plant equipment (straight-line) Utilities ($60,000 is variable) Plant management salaries 45,000 300,000 195,000 210,000 1,905,000 Gross profit Selling expenses Packaging Shipping 1,245,000 75,000 90,000 Sales salary (fixed annual amount) 235,000 400,000 General and administrative expenses Advertising expense 125,000 Salaries 230,000 85,000 440,000 Entertainment expense $ 405,000 Income from operations Required 1&2.Prepare flexible budgets for the company at sales volumes of 14,000 and 16,000 units and classify all items listed in the fixed budget as variable or fixed PHOENIX COMPANY Fixed Budget Report For Year Ended December 31, 2015 Flexible Budget Flexible Budget for: Variable Amount Total Fixed Units Sales of Unit Sales of 14,000 per Unit Cost 16,000 Sales Variable costs Direct materials Direct labor Machinery repairs Utilities Packaging Shipping Total variable costs 0.00 Contribution margin Fixed costs Depreciation-plant equipment (straight-line) Utilities Plant management salaries Sales salary Advertising expense Salaries Entertainment expense otal fixed costs Income from operations 3. The company's business conditions are improving. One possible result is a sales volume of approximately 18,000 units. The company president is confident that this volume is within the relevant range of existing capacity. How much would operating income increase over the 2015 budgeted amount of $405,000 if this level is reached without increasing capacity? PHOENIX COMPANY Forecasted Contribution Margin Income Statement For Year Ended December 31, 2015 15,000 18,000 Sales (in units) Contribution margin (per unit) Contribution margin Fixed costs Expected increase in operating income 4. An unfavorable change in business is remotely possible; in this case, production and sales volume for 2015 could fall to 12,000 units. How much income (or loss) from operations would occur if sales volume falls to this level? (Enter any loss with minus sign.) PHOENIX COMPANY Forecasted Contribution Margin Income Statement For Year Ended December 31, 2015 Sales (in units) 15,000 12,000 Contribution margin (per unit) Contribution margin Fixed costs Operating income (loss)