Question

Phoenix Company’s 2017 master budget included the following fixed budget report. It is based on an expected production and sales volume of 17,000 units.

PHOENIX COMPANY Fixed Budget Report For Year Ended December 31, 2017
Sales				$	3,825,000
Cost of goods sold
Direct materials	$	850,000
Direct labor		340,000
Machinery repairs (variable cost)		51,000
Depreciation—Plant equipment (straight-line)		330,000
Utilities ($34,000 is variable)		184,000
Plant management salaries		215,000			1,970,000
Gross profit					1,855,000
Selling expenses
Packaging		68,000
Shipping		102,000
Sales salary (fixed annual amount)		260,000			430,000
General and administrative expenses
Advertising expense		134,000
Salaries		251,000
Entertainment expense		110,000			495,000
Income from operations				$	930,000

Phoenix Company’s actual income statement for 2017 follows.

PHOENIX COMPANY Statement of Income from Operations For Year Ended December 31, 2017
Sales (20,000 units)				$	4,578,000
Cost of goods sold
Direct materials	$	1,016,000
Direct labor		407,000
Machinery repairs (variable cost)		51,000
Depreciation—Plant equipment (straight-line)		330,000
Utilities (fixed cost is $147,500)		187,000
Plant management salaries		225,000			2,216,000
Gross profit					2,362,000
Selling expenses
Packaging		77,000
Shipping		113,000
Sales salary (annual)		277,000			467,000
General and administrative expenses
Advertising expense		143,000
Salaries		251,000
Entertainment expense		113,500			507,500
Income from operations				$	1,387,500

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

Answer 1