Problem 23-1A Part 3 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 $480,000 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 incomo 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. PHOENIX COMPANY Fixed Budget Report For Year Ended December 31, 2019 Sales $3,300,000 Cost of goods sold Direct materials $945,000 Direct labor 225,000 Machinery repairs (variable cost) 45,000 Depreciation-Plant equipment (straight-line) 315,000 Utilities ($60,000 is variable) 195,000 Plant management salaries 220,000 1,945,000 Gross profit 1,355,000 Selling expenses Packaging 75,000 Shipping 105,000 Sales salary fixed annual amount) 235,000 415,000 General and administrative expenses Advertising expense 150,000 Salaries 230,000 Entertainment expense 80,000 460,000 Income from operations $ 480,000 Problem 23-1A 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. Flexible Budget Variable Amount Total Fixed Cost 220.00 per Unit Flexible Budget for: Units Sales Unit Sales of of 14,000 16,000 $ 3,080,000 $3,520,000 Sales Variable costs Direct materials 63.00 15.00 3.00 Direct labor Machinery repairs Utilities Packaging Shipping 882,000 210,000 42,000 56,000 70,000 98,000 4.00 5.00 7.00 1,008,000 240,000 48,000 64,000 80,000 112,000 97.00 123.00 $ 1,358,000 1,722,000 1,552,000 1,968,000 Total variable costs Contribution margin Fixed costs Depreciation-Plant equipment (straight-line) Utilities Plant management salaries Sales salary Advertising expense Salaries Entertainment expense 315,000 135,000 220,000 235,000 150,000 230,000 80,000 315,000 135,000 220,000 235,000 150,000 230,000 80,000 315,000 135,000 220,000 235,000 150,000 230,000 80,000 Total fixed costs Income from operations $ 1,365,000 $ 1,365,000 $1,365,000 $ 357,000 $ 603,000