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	$	930,000
Direct labor		240,000
Machinery repairs (variable cost)		60,000
DepreciationPlant equipment (straight-line)		300,000
Utilities ($30,000 is variable)		210,000
Plant management salaries		200,000			1,940,000
Gross profit					1,210,000
Selling expenses
Packaging		75,000
Shipping		90,000
Sales salary (fixed annual amount)		235,000			400,000
General and administrative expenses
Advertising expense		125,000
Salaries		230,000
Entertainment expense		75,000			430,000
Income from operations				$	380,000

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.

1B. 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 $380,000 if this level is reached without increasing capacity?

1C. 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?

PHOENIX COMPANY Fixed Budget Report For Year Ended December 31, 2017 Flexible Budget Variable Amount Total Fixed per Unit Cost Flexible Budget for: Units Sales Unit Sales of of 14,000 16,000 Variable costs Fixed costs 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 12,000 PHOENIX COMPANY Forecasted Contribution Margin Income Statement For Year Ended December 31, 2017 Sales (in units) 15,000 Contribution margin (per unit) Contribution margin Fixed costs Operating income (loss)