Phoenix Companys 2017 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, 2017

Sales

$

3,150,000

Cost of goods sold

Direct materials

$

945,000

Direct labor

225,000

Machinery repairs (variable cost)

45,000

DepreciationPlant equipment (straight-line)

300,000

Utilities ($45,000 is variable)

195,000

Plant management salaries

200,000

1,910,000

Gross profit

1,240,000

Selling expenses

Packaging

90,000

Shipping

105,000

Sales salary (fixed annual amount)

235,000

430,000

General and administrative expenses

Advertising expense

125,000

Salaries

230,000

Entertainment expense

85,000

440,000

Income from operations

$

370,000

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, 2017
	Flexible Budget		Flexible Budget for:
	Variable Amount per Unit	Total Fixed Cost	Units Sales of 14,000	Unit Sales of 16,000
Variable costs
Fixed costs

The companys 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 existing capacity. How much would operating income increase over the 2017 budgeted amount of $370,000 if this level is reached without increasing capacity?

PHOENIX COMPANY
Forecasted Contribution Margin Income Statement
For Year Ended December 31, 2017
Sales (in units)	15,000	18,000
Contribution margin (per unit)
Contribution margin
Fixed costs
Operating income

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 volume falls to this level? (Enter any loss with minus sign.)

PHOENIX COMPANY
Forecasted Contribution Margin Income Statement
For Year Ended December 31, 2017
Sales (in units)	15,000	12,000
Contribution margin (per unit)
Contribution margin
Fixed costs
Operating income (loss)