Problem 21-1A Preparation and analysis of a flexible budget LO P1 [The following information applies to the questions displayed below.] Phoenix Company's 2015 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, 2015 Sales Cost of goods sold Direct materials $ 975,000 Direct labor 225,000 Machinery repairs (variable cost) 45,000 Depreciation-plant equipment (straight-line) 315,000 Utilities ($45,000 is variable) 195,000 Plant management salaries 190,000 1,945,000 1,355,000 Gross profit Selling expenses Packaging Shipping Sales salary (fixed annual amount) 90,000 90,000 235,000 415,000 General and administrative expenses Advertising expense Salaries Entertainment expense 150,000 230,000 85,000 465,000 Income from operations $ 475,000 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. PHOENIX COMPANY Fixed Budget Report For Year Ended December 31, 2015 Flexible Budget Variable Amount Total Fixed per Unit Cost Flexible Budget for: Units Sales of Unit Sales of 14,000 16,000 Variable costs 0. 000 0 Fixed costs $ 0 $ 0 $ 0 The company's business conditions are improving. One possible result is a sales volume of approximately 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 2015 budgeted amount of $475,000 if this level is reached without increasing capacity? PHOENIX COMPANY Forecasted Contribution Margin Income Statement For Year Ended December 31, 2015 Sales (in units) 15,000 18,000 Contribution margin (per unit) Contribution margin Fixed costs Expected increase in operating income An unfavorable change in business is remotely possible; in this case, production and sales volume for 2015 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 12,000 Forecasted Contribution Margin Income Statement For Year Ended December 31, 2015 Sales (in units) 15,000 Contribution margin (per unit) Contribution margin Fixed costs Operating income (loss)