Required information Problem 08-1A Preparing and analyzing a flexible budget LO P1, A1 [The following information applies to the questions displayed below.) 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 $960,000 Direct labor 240,000 Machinery repairs (variable 60,000 cost) Depreciation-Plant equipment 315,000 (straight-line) Utilities ($60,000 is 195,000 variable) Plant management salaries 220,000 1,990,000 Gross profit 1,310,000 Selling expenses Packaging 75,000 Shipping 90,000 Sales salary (fixed annual 235,000 400,000 amount) General and administrative expenses Advertising expense 125,000 Salaries 230,000 Entertainment expense 75,000 430,000 Income from operations $ 480,000 Problem 08-1A 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. PHOENIX COMPANY Flexible Budgets For Year Ended December 31, 2019 Flexible Budget Variable Total Amount per Fixed Unit Cost Flexible Budget for: Units Unit Sales of Sales of 14,000 16,000 Variable costs 0.00 Fixed costs $ 0 $ 0 $ Problem 08-1A 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 income Problem 08-1A Part 4 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)