Problem 23-1A 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 an expected production and sales volume of 15,000 units. PHOENIX COPANY Fixed Budget Report For Year Ended December 31, 2017 Sales $3,000,000 Cost of goods sold Direct materials $975,000 Direct labor 225,000 60,000 300,000 Machinery repairs (variable cost) Depreciation-Plant equipment (straight-line) Utilities ($45,000 is variable) Plant management salaries 195,000 200,000 1,955,000 Gross profit Selling expenses Packaging 1,045,000 75,000 105000 Sales salary (fixed annual amount) 250,000 430,000 General and administrative expenses Advertising expense 125,000 241,000 Salaries Entertainment expense 90,000 456,000 159,000 Income from operations Droblem 23-1A Dart 18.2 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 budget as variable or fixed. PHOENIX COMPANY Fixed Budget Report For Year Ended December 31, 2017 Flexible Budget Flexible Budget for: Variable Amount Total Fixed Units Sales of 14,000 Unit Sales of Cost 16,000 per Unit Variable costs 0.00 C 0 Fixed costs Fixed costs es 0 $ 0 C 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 budgeted amount of $159,000 if this level is reached without increasing capacity? relevant range of existing capacity. How much would operating income increase over the 2017 PHOENIX COMPANY Forecasted Contribution Margin Income Statement For Year Ended December 31, 2017 Sales (in units) 18,000 15,000 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 2017 could fall to 12,000 units. How much income (or loss) from operations would occur 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)