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 PHOENIX COMPANY Fixed Budget Report For Year Ended December 31, 2017 Sales Cost of goods sold Direct msterials Disect labor Machinery repairs (variable cost $975,000 225,000 60,000 wwa300,000 Plant management salaries Gross prefit.. Selling esperses ,000 .. 75,000 Sales saiary (hoed annual amount) 25000 430,000 General and administrative expenses Advertising expense 125,000 241,000 90,000 456,000 acome from operations 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 existing capacity. How much would operating income increase over the 2017 budgeted amount of S159,000 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 volume falls to this level? EXHIBIT 21.3 Flexible Budgets (preared before the period) Flexible Eudgets For Manth Ended anuary 31. 2012 Flexible Badget Flexible Rudget for Unit Sales of Fxed Cost Amcunt per Jnit $1000 0,00012.000 14,000 100,000 $120,000 $140,000 Varlable costs 0.000 12,00014.000 5,000 18,00021,000 20002,4002,800 Direct materisls irect labor Factory supples Utates Sales commissions Shipping expenses.. Office supplias Total variable costs 50 3,600 3.30 0.90 0.40 000 10,80012,600 5.600 ,000 67,200 52000 62.400 $ 72.800 4000 5.000 8000 57,500 , , 6,000 1,80 Coetrbution margin Flred costs 8,000 8000 8.000 8,000 Supervisory salarikes Insurance espense 1,000 11000 11,000 11,000 1,000 1.000 1,000 ,0007,0007,000 1,000 7000 13,000 13.00013000 Ad rinistratve salaries Totd fued costs 4000040.000 40.0040000 $12.000 $ 22,400 800 Income from aperstions