Question

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.

Answer 1

Answer:

1

PHOENIX COMPANY
Flexible Budget Report
For Year Ended December 31, 2015
	Flexible Budget		Flexible Budget
	Variable Amount per unit	Total Fixed cost	Units sales 14000	Units sales 16000
Sales	200		2800000	3200000
Cost of goods sold			0	0
Direct materials	63		882000	1008000
Direct labor	14		196000	224000
Machinery repairs	4		56000	64000
Utilities	3		42000	48000
Packaging	6		84000	96000
Shipping:	7		98000	112000
Total variable cost	97		1358000	1552000
Contribution margin	103		1442000	1648000
Less: Fixed cost
Depreciation		300,000	300,000	300,000
Utilities		135000	135,000	135,000
Plant management salaries		220,000	220,000	220,000
Sales Salary		235000	235,000	235,000
Advertising expense		125000	125,000	125,000
Salaries		230,000	230,000	230,000
Entertainment expense		80,000	80,000	80,000
Total Fixed cost		1,325,000	1,325,000	1,325,000
Income from operations			117,000	323,000

2

PHOENIX COMPANY
Forecasted Contribution margin income statement
For the year ended Dec-31-2015
Possible sales (units)	15000	18000
Contribution margin per unit	× 103	× 103
Total contribution margin	1545000	1854000
Less: Fixed costs	1,325,000	1,325,000
operating income	220000	529000	309000	Operating income increase

3

PHOENIX COMPANY
Forecasted Contribution margin income statement
For the year ended Dec-31-2015
Possible sales (units)	15000	12000
Contribution margin per unit	× 103	× 103
Total contribution margin	1545000	1236000
Less: Fixed costs	1,325,000	1,325,000
operating income (loss)	220000	-89000	-309000	Operating income decrease

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