Phoenix Companys 2015 master budget included the following fixed budget report. It is based on an expected production and sales volume of 15,000 units.

PHOENIX COMPANY Fixed Budget Report For Year Ended December 31, 2015

Sales

$

3,000,000

Cost of goods sold

Direct materials

$

960,000

Direct labor

240,000

Machinery repairs (variable cost)

45,000

Depreciationplant equipment (straight-line)

315,000

Utilities ($60,000 is variable)

195,000

Plant management salaries

210,000

1,965,000

Gross profit

1,035,000

Selling expenses

Packaging

90,000

Shipping

90,000

Sales salary (fixed annual amount)

235,000

415,000

General and administrative expenses

Advertising expense

125,000

Salaries

241,000

Entertainment expense

85,000

451,000

Income from operations

$

169,000

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.

3.

The companys 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 $169,000 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 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.)