Required Informatlon IThe following Information appliles to the questions displa

Question

Required Informatlon IThe following Information appliles to the questions displayed below. Phoenlx Company's 2017 master budget Included the following fixed budget report. It is based on an expected production and sales volume of 15,000 unlts PHOENIX COMPANY Fixed Budget Report For Year Ended December 31, 2017 Sales Cost of goods sold $3,eee,e00 Direct materials Direct labor Machinery repairs (variable cost) Depreciation-Plant equipment (straight-line) utilities ($30,e0e is variable) Plant management salaries $915,eee 21e,8ee 60,00 315,8ee 18e,eee 200,8ee 1,88e,e00 Gross profit Selling expenses 1,12e,e00 Packaging Shipping Sales salary (fixed annual amount) 75,8e0 90,00 235,eee 400,000 General and administrative expenses Advertising expense Salaries Entertainment expense 1e,eee 241,8e0 85,8e0 426.000 Income from operations $ 294,e00 3. The company's buslness 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 $294,000 If this level Is reached without Increasing capacity? PHOENIX COMPANY Forecasted Contribution Margin Income Statement For Year Ended December 31, 2017 Sales (in units) Contribution margin (per unit) Contribution margin Fixed costs Operating income 15,000 18,000

Explanation / Answer

First we shall find out the fixed cost

Fixed Cost = $315000+$150000+$200000+$235000+$426000 = $1326000

Contribution = Sales - Variable cost

= $3000000 - ($915000+210000+60000+30000+75000+90000)

= $1620000

Contribution per unit = $1620000/15000 = $108

There is a net increase of $324000

Paticuars Sales units 15000 18000 Contribution per unit $108 $108 Contribution margin $1620000 $1944000 Fixed cost $1326000 $1326000 Operating income $294000 $618000

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