Phoenix Companys 2019 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, 2019 Sales $ 3,150,000 Cost of goods sold Direct materials $ 915,000 Direct labor 225,000 Machinery repairs (variable cost) 45,000 DepreciationPlant equipment (straight-line) 300,000 Utilities ($60,000 is variable) 210,000 Plant management salaries 190,000 1,885,000 Gross profit 1,265,000 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 241,000 Entertainment expense 90,000 456,000 Income from operations $ 379,000

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.

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		Flexible Budget for:
	Variable Amount per Unit	Total Fixed Cost	Units Sales of 14,000	Unit Sales of 16,000
Sales	$36.00
Variable costs
Direct materials
Direct labor
Machinery repairs
Utilities
Packaging
Shipping
Total variable costs	0.00		0	0
Contribution margin
Fixed costs
DepreciationPlant equipment (straight-line)
Utilities
Plant management salaries
Sales salary
Advertising expense
Salaries
Entertainment expense
Total fixed costs		$0	$0	$0
Income from operations

3.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 budgeted amount of $379,000 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 marg

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)