Required information [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 COMPANY Fixed Budget Report For Year Ended December 31, 2017 $3,150,000 Sales Cost of goods sold Direct materials $930,000 Direct labor 210,000 Machinery repairs (variable cost) DepreciationPlant 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 60,000 315,000 210,000 220,000 1,945,000 1,205,000 75,000 105,000 235,000 415,000 Advertising expense 100,000 Salaries 241,000 Entertainment expense 85,000 426,000 364,000 Income from operations Required information [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 COMPANY Fixed Budget Report For Year Ended December 31, 2017 Sales $3,150,000 Cost of goods sold Direct materials $930,000 Direct labor Machinery repairs (variable cost) Depreciation-Plant equipment (straight-line) Utilities ($ 45,000 is variable) 210,000 60,000 315,000 210,000 1,945,000 Plant management salaries Gross profit Selling expenses Packaging Shipping Sales salary (fixed annual amount) General and administrative expenses Advertising expense 220,000 1,205,000 75,000 105,000 235,000 415,000 100,000 Salaries 241,000 Entertainment expense 85,000 426,000 $ 364,000 Income from operations 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 2017 budgeted amount of $364,000 if this level is reached without increasing capacity? 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 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, 2017 Flexible Budget Variable Amount per Unit Flexible Budget for: Unit Sales of 16,000 Total Fixed Cost Units Sales of 14,000 Sales Variable costs Direct materials Direct labor Machinery repairs Utilities Packaging Shipping Total variable costs 0.00 Contribution margin Fixed costs Depreciation-Plant equipment (straight-line) Advertising expense Entertainment expense Plant management salaries Utilities Sales salary Salaries Total fixed costs Income from operations Required information [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 COMPANY Fixed Budget Report For Year Ended December 31, 2017 Sales $3,150,000 Cost of goods sold $930,000 210,000 Direct materials Direct labor Machinery repairs (variable cost) Depreciation-Plant equipment (straight-line) Utilities ($45,000 is variable) Plant management salaries 60,000 315,000 210,000 220,000 1,945,000 Gross profit 1,205,000 Selling expenses Packaging Shipping Sales salary (fixed annual amount) General and administrative expenses Advertising expense 75,000 105,000 235,000 415,000 100,000 Salaries 241,000 Entertainment expense 85,000 426,000 Income from operations 364,000 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 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) 12,000 15,000 Contribution margin (per unit) Contribution margin Fixed costs Operating income (loss)
