t report. It is based on an Phoenix Company\'s 2015 master budget included the f
ID: 2475481 • Letter: T
Question
t report. It is based on an Phoenix Company's 2015 master budget included the following fixed budge expected production and sales volume of 15,000 units A PHOENIX COMPANY Fixed Budget Report For Year Ended December 31,2015 $3,000.000 Sales Cost of goods sold $975,000 225,000 60,000 300,000 195,000 Direct materials. Direct labor Depreciation-plant equipment (straight-line). Utilities ($45.000 is variable) Plant management salaries . 200,000 1955,000 1,045,000 Gross profit Selling expenses Packaging Shipping Sales salary (fixed annual amount) . . . . . . . . 75,000 105,000 . . . . -250,000 430,000 . . . . . . General and administrative expenses Advertising expense 125,000 ....241,000 90,000 456,000 159,000 Required 1. Classify all items listed in the fixed budget as variable or fixed. Also determine their amounts per unit 2. Prepare flexible budgets (see Exhibi 3. The company's business conditions are improving. One possible result is a sales volume of 18,000 or their amounts for the year, as appropriate. it 23.3) for the company at sales volumes of 14,000 and 16,000 units. units. The company president is confident that this volume is within the relevant range of existing ca- pacity. How much would operating income increase over the 2015 budgeted amount of $159.000 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 2015 could fall to 12.000 units. How much income (or loss) from operations would occur if sales vol- ume falls to this level?Explanation / Answer
1)
2)
3)
As we can see from flexible budget that Sales Price per unit is $200 and Variable cost per unit is $99. That means we have a contribition of $101 per unit.
So , that $101 will be earned on each additional units i.e 18000 units.
Increase In Operating income will be
= (18000-15000)*101
= $303,000
4) That $101 contribution will be lost on each units i.e 12000 units.
Increase In Operating income will be
= (15000-12000)*101
= $303,000
Classification of fixed & Variable expenses(In $) Amount Per Unit Sales $ 200.00 Variable expenses Direct Materials $ 65.00 Direct Labor $ 15.00 Machinery Repairs $ 4.00 Utilities $ 3.00 Packaging $ 5.00 Shipping $ 7.00 Total Variable Cost $ 99.00 Fixed Expenses Total Amount Depreciation $ 3,00,000.00 Utilities $ 1,50,000.00 Plant Management $ 2,00,000.00 Sales Salary $ 2,50,000.00 Advertising Expenses $ 1,25,000.00 Salaries $ 2,41,000.00 Entertainment Expenses $ 90,000.00 Total Fixed Cost $13,56,000.00Related Questions
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