Problem 21-1A Preparation and analysis of a flexible budget LO P1 The following

Question

Problem 21-1A Preparation and analysis of a flexible budget LO P1 The following information applies to the questions displayed below. Phoenix Company's 2015 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, 2015 $3,150,000 Sales Cost of goods sold Direct materials Direct labor Machinery repairs (variable cost) Depreciation-plant equipment (straight-ine) Utilities ($45,000 is variable) Plant management salaries $930,000 225,000 60,000 330,000 95,000 200,0001,940,000 Gross profit Selling expenses 1.210,000 Packaging Shipping Sales salary (fixed annuel amount) 75,000 90,000 235.000 400.000 General and administrative expenses Advertising expense Salarles Entertainment expense 100,000 230.000 80,000 410,000 ncome from operations $ 400,000

Explanation / Answer

1 & 2 PHOENIX COMPANY Flexible Budgets For Year Ended December 31, 2013 Variable Amount per Unit Total Fixed Cost Units Sales of 14,000 Unit Sales of 16,000 Sales (3150000÷15000) $                   210 $   2,940,000 $                      3,360,000 Variable costs Direct materials (930000÷ 15000)                         62          868,000 992,000 Direct labor (225000÷ 15000)                         15          210,000 240,000 Machinery repairs (60000÷15000)                           4            56,000 64,000 Utilities (45000÷15000)                           3            42,000 48,000 Packaging(75000÷15000)                           5            70,000 80,000 Shipping (90000÷15000)                           6            84,000 96,000 Total variable costs                         95       1,330,000                          1,520,000 Contribution margin $                   115 $   1,610,000 1,840,000 Fixed costs Depreciation—Plant equipment $       330,000 $      330,000 $                         330,000 Utilities           150,000          150,000                             150,000 Plant management salaries           200,000          200,000                             200,000 Sales salary           235,000          235,000                             235,000 Advertising           100,000          100,000                             100,000 Salaries           230,000          230,000                             230,000 Entertainment expense             80,000            80,000                               80,000 Total fixed costs $    1,325,000 $   1,325,000 $                      1,325,000 Income from operations $      285,000 $                         515,000 3 PHOENIX COMPANY Forecasted Contribution Margin Income Statement For Year Ended December 31, 2015 Sales (In units)                          15,000                   18,000 Contribution Margin (per unit) $                            115 $                     115 Contribution Margin $                1,725,000 $         2,070,000 Fixed Costs $                1,325,000 $         1,325,000 Expected Increase in operating income $                    400,000 $             745,000 $            345,000 Operating Income increase 4 PHOENIX COMPANY Forecasted Contribution Margin Income Statement For Year Ended December 31, 2015 Sales (In units)                          15,000                   12,000 Contribution Margin (per unit) $                            115 $                     115 Contribution Margin $                1,725,000 $         1,380,000 Fixed Costs $                1,325,000 $         1,325,000 Operating Income (loss) $                    400,000 $               55,000

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