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				$	3,150,000
Cost of goods sold
Direct materials	$	960,000
Direct labor		240,000
Machinery repairs (variable cost)		45,000
Depreciation—Plant equipment (straight-line)		300,000
Utilities ($45,000 is variable)		210,000
Plant management salaries		200,000			1,955,000
Gross profit					1,195,000
Selling expenses
Packaging		75,000
Shipping		105,000
Sales salary (fixed annual amount)		235,000			415,000
General and administrative expenses
Advertising expense		150,000
Salaries		241,000
Entertainment expense		90,000			481,000
Income from operations				$	299,000

Required:
1&2. Prepare flexible budgets for the company at sales volumes of 14,000 and 16,000 units and classify all items listed in the fixed budget as variable or fixed.

prepare the fied budget report

Answer 1

PHOENIX COMPANY
Fixed Budget Report
For Year Ended December 31, 2017
	Flexible Budget			Flexible Budget for:
	Sales of 15,000	Variable Amount per Unit	Total Fixed Cost	Units Sales of 14,000	Unit Sales of 16,000
	15,000			14,000	16,000
Sales	$3,150,000	$    210		$ 2,940,000	$3,360,000
Variable costs				$              -	$             -
Direct materials	$   960,000	$      64		$    896,000	$1,024,000
Direct labor	$   240,000	$      16		$    224,000	$   256,000
Machinery repairs	$     45,000	$        3		$      42,000	$     48,000
Utilities	$     45,000	$        3		$      42,000	$     48,000
Packaging	$     75,000	$        5		$      70,000	$     80,000
Shipping	$   105,000	$        7		$      98,000	$   112,000
Total Variable costs	$1,470,000	$      98		$ 1,372,000	$1,568,000
Contribution Margin	$1,680,000	$    112		$ 1,568,000	$1,792,000
Fixed costs
Utilities	$   165,000		$    165,000	$    165,000	$   165,000
Plant management salaries	$   200,000		$    200,000	$    200,000	$   200,000
Sales salary	$   235,000		$    235,000	$    235,000	$   235,000
Advertising expense	$   150,000		$    150,000	$    150,000	$   150,000
Salaries	$   241,000		$    241,000	$    241,000	$   241,000
Entertainment expense	$     90,000		$      90,000	$      90,000	$     90,000
Depreciation	$   300,000		$    300,000	$    300,000	$   300,000
Total Fixed costs	$1,381,000		$ 1,381,000	$ 1,381,000	$1,381,000
Operating Income	$   299,000			$    187,000	$   411,000