4. An unfavorable change in business is remotely possible; in this case, product

Question

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.)

Help r 21-Homework PROTNIX COMPANY Pixed Budget Report 3,150.000 Cost of goods sold of 3 $975,000 225,000 Direot 1abor Kachinery repairs (variable cost) Depreciation-Plant equipnent (straight-line) Otilities (S60,00?ia variable) Plant mansgenent salaries 300,000 210,000 200,000 1,970,000 Gross profit 1,180,00o Packaging shipping Sales salary (Eixed aneual anount) 90,000 _amoo 400,000 General and adninistrative expenses 125.000 dvertising expense Balariers Entertainnent expense 80000446 000 Incone from eperations 334,000 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 $334000 if this level is reached without increasing capacity? Forecasted Contribution Margin Income Statement For Year Ended December 31, 2017 15.000 18,000 Sales (in units) Contribution margin (per unit) Fixed costs Operating inoome CPrev2 3 of4l Next MacBook Air 80 2 3 FS 10

Explanation / Answer

Answer 3. PHOENIX COMPANY Forecasted Contribution Margin Income Statement For the Year Ended Dec 31, 2017 Units Sold 15,000 Units Sold 18,000 Diference Sales In Units          15,000.00          18,000.00 Contribution Margin (Per Unit)                111.00                111.00 Contribution Margin    1,665,000.00    1,998,000.00 Fixed Cost    1,331,000.00    1,331,000.00 Operating Income        334,000.00        667,000.00        333,000.00 (Expected Inc. (Dec.) in Operating Income) Flexible Budget Variable Amt. Per Unit Total Fixed Cost Sales                210.00 Variable Cost: Direct Materials                  65.00 Direct Labor                  15.00 Machinery Repairs                     4.00 Utilities                     4.00 Packaging                     5.00 Shipping                     6.00 Total Variable Cost                  99.00 Contribution                111.00 Fixed Cost Depreciation - Plant Equipment        300,000.00 Utilities        150,000.00 Plant Management Salaries        200,000.00 Sales Salary        235,000.00 Advertising Expense        125,000.00 Salaries        241,000.00 Entertainment Expense          80,000.00 Total Fixed Cost    1,331,000.00

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