Question

Phoenix Company’s 2017 master budget included the following fixed budget report. It is based on an expected production and sales volume of 15,000 units.

PHOENIX COMPANY Fixed Budget Report For Year Ended December 31, 2017
Sales				$	3,375,000
Cost of goods sold
Direct materials	$	975,000
Direct labor		300,000
Machinery repairs (variable cost)		60,000
Depreciation—Plant equipment (straight-line)		330,000
Utilities ($45,000 is variable)		205,000
Plant management salaries		215,000			2,085,000
Gross profit					1,290,000
Selling expenses
Packaging		75,000
Shipping		105,000
Sales salary (fixed annual amount)		270,000			450,000
General and administrative expenses
Advertising expense		130,000
Salaries		261,000
Entertainment expense		100,000			491,000
Income from operations				$	349,000

Phoenix Company’s actual income statement for 2017 follows.

PHOENIX COMPANY Statement of Income from Operations For Year Ended December 31, 2017
Sales (18,000 units)				$	4,128,000
Cost of goods sold
Direct materials	$	1,187,000
Direct labor		368,000
Machinery repairs (variable cost)		63,000
Depreciation—Plant equipment (straight-line)		330,000
Utilities (fixed cost is $158,000)		211,000
Plant management salaries		226,000			2,385,000
Gross profit					1,743,000
Selling expenses
Packaging		87,250
Shipping		119,000
Sales salary (annual)		287,000			493,250
General and administrative expenses
Advertising expense		138,000
Salaries		261,000
Entertainment expense		103,500			502,500
Income from operations				$	747,250

Required:
1. Prepare a flexible budget performance report for 2017.

Answer 1