Problem 23-2A Preparation and analysis of a flexible budget performance report L
ID: 2436301 • Letter: P
Question
Problem 23-2A Preparation and analysis of a flexible budget performance report LO P1, P2, A1
Phoenix Company’s 2017 master budget included the following fixed budget report. It is based on an expected production and sales volume of 16,000 units.
Phoenix Company’s actual income statement for 2017 follows.
Required:
1. Prepare a flexible budget performance report for 2017.
Fixed Budget Report
For Year Ended December 31, 2017 Sales $ 3,200,000 Cost of goods sold Direct materials $ 960,000 Direct labor 240,000 Machinery repairs (variable cost) 48,000 Depreciation—Plant equipment (straight-line) 315,000 Utilities ($32,000 is variable) 182,000 Plant management salaries 215,000 1,960,000 Gross profit 1,240,000 Selling expenses Packaging 64,000 Shipping 96,000 Sales salary (fixed annual amount) 260,000 420,000 General and administrative expenses Advertising expense 127,000 Salaries 241,000 Entertainment expense 110,000 478,000 Income from operations $ 342,000
Explanation / Answer
PHOENIX COMPANY Flexible budget performance Report For the Year Ended Dec 31, 2017 Flexible Budget Actual Budget Variance Fav./Unfav Sales (19,000 units) (200 x q) 3,800,000 3,848,000 48,000 Fav. (3200000/16000) = 200 Variable costs Direct material (60 x q) 1,140,000 1,157,000 17,000 Unfav. (960000/16000) = 60 Direct Labor (15 x q) 285,000 294,000 9,000 Unfav. (240000/16000) = 15 Machinery repairs (variable cost) (3 x q) 57,000 48,000 9,000 Fav. (48000/16000) = 3 Utilities (2 x q) 38,000 37,250 750 Fav. (32000/16000) = 2 Packaging (4 x q) 76,000 73,250 2,750 Fav. (64000/16000) = 4 Shipping (6 x q) 114,000 107,000 7,000 Fav. (96000/16000) = 6 Total Variable costs 1,710,000 1,716,500 6,500 Unfav. Contribution margin 2,090,000 2,131,500 41,500 Fav. Fixed costs Depreciation-plant equipment 315,000 315,000 - Utilities 150,000 148,000 2,000 Fav. Plant management salaries 215,000 225,000 10,000 Unfav. Sales salaries 260,000 277,000 17,000 Unfav. Advertising expense 127,000 135,000 8,000 Unfav. Salaries 241,000 241,000 - Entertainment expense 110,000 113,000 3,000 Unfav. Total fixed costs 1,418,000 1,454,000 36,000 Unfav. Income from operations 672,000 677,500 5,500 Fav.
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