Required information [The following information applies to the questions display

Question

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 Direct labor Machinery repairs (variable cost) Depreciation-Plant equipment (straight-line) Utilities ($45,000 is variable) Plant management salaries $960,000 210,000 45,000 315,000 195,000 220,000 1,945,000 1,205,000 Gross profit Selling expenses Packaging Shipping sales salary (fixed annual amount) 75,000 90,000 235,000 400,000 General and administrative expenses Advertising expense Salaries Entertainment expense 100,000 230,000 80,000 410,000 $395,000 Income from operations 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

Explanation / Answer

PHOENIX Company Flexible Budget For the year ended december 31st,2017 Flexible Budget Flexible Budget for Variable amount per unit Total Fixed Cost 14000 16000 Sales($3150000/15000)=(A) $              210.00 $ 29,40,000.00 $ 33,60,000.00 Variable Cost Direct Material($960000/15000) $                 64.00 $    8,96,000.00 $ 10,24,000.00 Direct Labor($210000/15000) $                 14.00 $    1,96,000.00 $    2,24,000.00 Machinery Repairs($45000/15000) $                   3.00 $       42,000.00 $       48,000.00 Utilities($45000/15000) $                   3.00 $       42,000.00 $       48,000.00 Packaging($75000/15000) $                   5.00 $       70,000.00 $       80,000.00 Shipping($90000/15000) $                   6.00 $       84,000.00 $       96,000.00 Total Variable cost=(B) $                 95.00 $ 13,30,000.00 $ 15,20,000.00 Contribution Margin=( C) =(A)-(B) $              115.00 $ 16,10,000.00 $ 18,40,000.00 Fixed Cost Depreciation on Plant Equipment $    3,15,000.00 $    3,15,000.00 $    3,15,000.00 Utilities $    1,50,000.00 $    1,50,000.00 $    1,50,000.00 Plant Management salaries $    2,20,000.00 $    2,20,000.00 $    2,20,000.00 Sales Salaries $    2,35,000.00 $    2,35,000.00 $    2,35,000.00 Advertising $    1,00,000.00 $    1,00,000.00 $    1,00,000.00 Salaries $    2,30,000.00 $    2,30,000.00 $    2,30,000.00 Entertainment Expenses $       80,000.00 $       80,000.00 $       80,000.00 Total Fixed Cost=(D) $ 13,30,000.00 $ 13,30,000.00 $ 13,30,000.00 Income from operation=(C )-(D) $    2,80,000.00 $    5,10,000.00 PHOENIX Company Forecasted Contribution Margin Income Statement For the year ended december 31st,2017 Sales (Units)=(A) 15000 18000 Contribution Margin Per unit=(B) $              115.00 $             115.00 Contribution Margin=(C )=(A)*(B) $ 17,25,000.00 $ 20,70,000.00 Fixed Cost=(D) $ 13,30,000.00 $ 13,30,000.00 Operating Income(C )-(D) $     3,95,000.00 $    7,40,000.00 Operating Income increases when sales units increasing from 15000 to 18000 units=($740000-$395000) $     3,45,000.00 PHOENIX Company Forecasted Contribution Margin Income Statement For the year ended december 31st,2017 Sales (Units)=(A) 15000 12000 Contribution Margin Per unit=(B) $              115.00 $             115.00 Contribution Margin=(C )=(A)*(B) $ 17,25,000.00 $ 13,80,000.00 Fixed Cost=(D) $ 13,30,000.00 $ 13,30,000.00 Operating Income(C )-(D) $     3,95,000.00 $       50,000.00 Operating Income decreaes when sales units decreasing from 15000 to 12000 units=($395000-$50000) $     3,45,000.00

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