3. Phoenix Company’s 2013 master budget included the following fixed budget repo
ID: 2489343 • Letter: 3
Question
3. Phoenix Company’s 2013 master budget included the following fixed budget report. It is based on an expected production and sales volume of 16,000 units.
PHOENIX COMPANY
Fixed Budget Report
For Year Ended December 31, 2013
Sales
$
3,200,000
Cost of goods sold
Direct materials
$
990,000
Direct labor
255,000
Machinery repairs (variable cost)
60,000
Depreciation—plant equipment
300,000
Utilities ($50,000 is variable)
200,000
Plant management salaries
230,000
2,035,000
Gross profit
1,165,000
Selling expenses
Packaging
85,000
Shipping
115,000
Sales salary (fixed annual amount)
250,000
450,000
General and administrative expenses
Advertising expense
126,000
Salaries
261,000
Entertainment expense
110,000
497,000
Income from operations
$
218,000
Phoenix Company’s actual income statement for 2013 follows.
PHOENIX COMPANY
Statement of Income from Operations
For Year Ended December 31, 2013
Sales (19,000 units)
$
3,863,000
Cost of goods sold
Direct materials
$
1,191,625
Direct labor
310,813
Machinery repairs (variable cost)
62,250
Depreciation—plant equipment
300,000
Utilities (fixed cost is $147,500)
206,125
Plant management salaries
240,000
2,310,813
Gross profit
1,552,187
Selling expenses
Packaging
98,188
Shipping
129,563
Sales salary (annual)
268,000
495,751
General and administrative expenses
Advertising expense
135,000
Salaries
261,000
Entertainment expense
113,000
509,000
Income from operations
$
547,436
3. Phoenix Company’s 2013 master budget included the following fixed budget report. It is based on an expected production and sales volume of 16,000 units.
Explanation / Answer
Calculations of Variable costs per unit based on the budgeted income statement.
Phoenix Company Flexible Budget Performance report For the year ended Dec 31, 2013 (in $) Flexible budget for 19000 units Actual results for 19000 units Variances Fav/Unfav Variable Costs Cost Formula Cost of goods sold Direct material 61.875 1175625 1191625 16000 Unfavourable direct labour 15.9375 302813 310813 8000 Unfavourable Machinery repairs 3.75 71250 62250 -9000 Favourable Utilities 9.375 178125 58625 -119500 Favourable Selling Expenses: Packaging 5.3125 100938 98188 -2750 Favouarble Shipping 7.1875 136563 129563 -7000 Favourable Fixed Cost Cost of goods sold Depreciation 300000 300000 300000 0 Utilities 150000 150000 147500 -2500 Favourable Plant Management salaries 230000 230000 240000 10000 Unfavourable Selling Expenses Sales salary 250000 250000 268000 18000 Unfavourable General and Administrative expenses Advertisement 126000 126000 135000 9000 Unfavourable Salaries 261000 261000 261000 0 Entertainment expenses 110000 110000 113000 3000 UnfavourableRelated Questions
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