Problem 3.Pheonix 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 COMPANYFixed Budget ReportFor Year Ended December 31, 2015 Sales Cost of goods sold: Direct materials Direct labor Machinery repairs (Variable cost) Depreciation-Equipment- straight-line Utilities ($45,000 is variable) Plant managers salaries Gross Profit Selling expenses: Packaging Shipping Sales salaries (fixed annual amount) General/Adm. Expenses: Advertising Expense Salaries Entertainment expense Income from operations $975,000 225,000 60,000 300,000 195,000 200,000 75,000 105,000 250,000 125,000 241,000 90,000 $3,000,000 1,955,000 1,045,000 430,000 456,000 $159,000 Required Classify all items listed in the fixed budget as variable or fixed. Also determine their amounts per unit or their amounts for the year, as appropriate. Prepare flexible budget for the company at volumes of 14,000 and 16,000 units. The company’s business 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 2015 budgeted amount of $159,000 if this level is reached without increasing capacity? An unfavorable change in business is remotely possible; in this case, production and sales volume for 2015 could fall to 12,000 units. How much income (or loss) from operation would occur if sales volume falls to this level?

Problem 3. Pheonix 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...

Problem 3.

Pheonix 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

Sales

Cost of goods sold:

Direct materials

Direct labor

Machinery repairs (Variable cost)

Depreciation-Equipment- straight-line

Utilities ($45,000 is variable)

Plant managers salaries

Gross Profit

Selling expenses:

Packaging

Shipping

Sales salaries (fixed annual amount)

General/Adm. Expenses:

Advertising Expense

Salaries

Entertainment expense

Income from operations

$975,000

225,000

60,000

300,000

195,000

200,000

75,000

105,000

250,000

125,000

241,000

90,000

$3,000,000

1,955,000

1,045,000

430,000

456,000

$159,000

Required

Classify all items listed in the fixed budget as variable or fixed. Also determine their amounts per unit or their amounts for the year, as appropriate.

Prepare flexible budget for the company at volumes of 14,000 and 16,000 units.

The company’s business 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 2015 budgeted amount of $159,000 if this level is reached without increasing capacity?

An unfavorable change in business is remotely possible; in this case, production and sales volume for 2015 could fall to 12,000 units. How much income (or loss) from operation would occur if sales volume falls to this level?

Jun 09, 2022

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Problem 3. Pheonix 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...

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