Tohono Company's 2017 master budget included the following fixed budget report. It is based on an expected production and sales volume of 20,000 units.

Required
1. Classify all items listed in the fixed budget as variable or fixed. Also determine their amounts per unit or their amounts for the year, as appropriate.
2. Prepare flexible budgets (Exhibit 23.3) for the company at sales volumes of 18,000 and 24,000 units.
3. The company's business conditions are improving. One possible result is a sales volume of 28,000 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 $125,000 if this level is reached without increasing capacity?
4. An unfavorable change in business is remotely possible; in this case, production and sales volume for 2017 could fall to 14,000 units. How much income (or loss) from operations would occur if sales volume falls to this level?

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TOHONO COMPANY Fxed Budget Report For Year Ended December 31, 2017 es $3,000,000 Cost of goods sold Direct materials $1,200,000 260,000 57,000 250,000 200,000 140,000 2,107,000 Machlnery repalrs (varlable cost) Depreclation-Machinery (straight-line).. Plant manager salarles Gross profit Sellilng expenses 893,000 Shipping Sales salary (fixed annual amount 80,000 116,000 16n 000 160,000 36.000 General and adminlstrative expenses Advertlsing Salarles Entertalnment expense 81,000 241,000 90,0004 412,000 125.000