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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. $3,300,000 PHOENIX COMPANY Fixed Budget Report For Year Ended December 31, 2019 Sales Cost goods sold Direct materials Direct labor Machinery repairs (variable cost) Depreciation-Plant equipment (straight-line) Utilities ($60,000 is variable) Plant management salaries Gross profit Selling expenses Packaging Shipping Sales salary (fixed annual amount) General and administrative expenses Advertising expense Salaries Entertainment expense Income from operations $ 930,000 225,000 45,000 330,000 195,000 200,000 1,925,000 1,375,000 75,000 105,000 235, eee 415,000 150,000 230,000 75,000 455,000 $ 505,000 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 Amount Total Fixed per Unit Cost Flexible Budget for: Units Sales Unit Sales of of 14,000 16,000 Variable costs 0.00 0 Fixed costs $ 0 $ 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 $505,000 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 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)