Phoenix Company's 2019 master budget included the following fixed budget report. It is based on an expected production and sales volume of 15,000 units. $3,300,000 PHOENIX COMPANY Fixed Budget Report For Year Ended December 31, 2019 Sales Cost of goods sold Direct materials $975,000 Direct labor 210,000 Machinery repairs (variable cost) 45,000 Depreciation-Plant equipment (straight-line) 315,000 Utilities ($30,000 is variable) 210,000 Plant management salaries 220,000 Gross profit Selling expenses Packaging 90,000 Shipping 105,000 Sales salary (fixed annual amount) 235,000 General and administrative expenses Advertising expense 100,000 Salaries 241,000 Entertainment expense 80,000 Income from operations 1,975,000 1,325,000 430,000 421,000 474,000 $ Problem 21-1A Part 1&2 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 Flexible Budgets For Year Ended December 31, 2019 Flexible Budget Variable Amount Total Fixed Cost Flexible Budget for: Units Sales Unit Sales of of 14,000 16,000 per Unit Sales Variable costs Utilities Direct labor Direct materials Packaging Shipping Machinery repairs Total variable costs 0.00 0 0 Contribution margin Fixed costs Advertising expense DepreciationPlant equipment (straight-line) Entertainment expense Sales salary Plant management salaries Salaries Utilities $ 0 $ 0 $ 0 fixed osts Income from operations 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 budgeted amount of $474,000 if this level is reached without increasing capacity? PHOENIX COMPANY Forecasted Contribution Margin Income Statement For Year Ended December 31, 2019 Sales (in units) 15,000 18,000 Contribution margin (per unit) Contribution margin Fixed costs Operating income 4. An unfavorable change in business is remotely possible; in this case, production and sales volume for the year 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, 2019 Sales (in units) 15,000 12,000 Contribution margin (per unit) Contribution margin Fixed costs Operating income (loss)