Problem 21-1A Preparation and analysis of a flexible budget LO P1 [The following information applies to the questions displayed below] Phoenix Company's 2017 master budget included the following fixed budget report. It is based on and sales volume of 15,000 units expected production an PHOENIX COMPANY Fixed Budget Report For Year Ended December 31, 2017 $3,300,000 Sales Cost of goods sold Direct materials 930,000 225,000 45,000 300,000 210,000 180,000 Direct labor Machinery repairs (variable cost) Depreciation-Plant equipment (straight-line) Utilities ($45,000 is variable) Plant management salaries Gross profit Selling expenses Packaging Shipping Sales salary (fixed annual amount) General and administrative expenses Advertising expense Salaries 1,890,000 1,410,000 75,000 90,000 235,000 400,000 100,000 230,000 75,000 Entertainment expense 405,000 605,000 Income from operations 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 varlable or fixed. PHOENIX COMPANY Fixed Budget Report For Year Ended December 31, 2017 Flexible Budget Variable Amount per Unit Flexible Budget for: Unit Sales of 16,000 Total Fixed Cost Units Sales of 14,000 Variable costs 0.00 0 Fixed costs Problem 21-1A Part 3 3. The company's business conditlons are Improving. One posslble result Is a sales volume of 18,000 unlts. 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 $605,000 If this level Is reached without Increaslng capacity? 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 Problem 21-1A Part 4 4. An unfavorable change in business Is remotely possible; in this case, production and sales volume for 2017 could fall to 12,000 unlts. 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, 2017 Sales (in units) 15,000 12,000 Contribution margin (per unit) Contribution margin Fixed costs Operating income (loss)