Phoenix Company\'s 2017 master budget included the following fixed budget report
ID: 2531477 • Letter: P
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. Fixed Budget Report Sales Cost of goods sold $3,825,000 Direct materials Direct labor Machinery repairs (variable cost) Depreciation-Plant equipment (straight-line) Utilities ($68,000 is variable) Plant management salaries $ 935,000 170,000 85,000 330,000 218,000 Gross profit Selling expenses 200,000 1,938,000 1,887,000 Packaging Shipping Sales salary (fixed annual amount) 102,000 136,000 206,0 498,000 128,000 251,000 General and administrative expenses Advertising expense Salaries Entertainment expense 469,000 $ 920,000 90,000 Income from operations Phoenix Company's actual income statement for 2017 follows. PHOENIX COMPANY Statement of Income from Operations For Year Ended December 31, 2017 $4,563,000 Sales (20,000 units) Cost of goods sold Direct materials Direct labor Machinery repairs (variable cost) Depreciation-Plant equipment (straight-line) Utilities (fixed cost is $148,000) Plant management salaries $1,116,000 208,000 92,000 330,000 227, 250 210,090 2,183, 259 2,379,750 Gross profit Selling expenses Packaging Shipping Sales salary (annual) 117,000 153,000 278,009548,000 General and administrative expenses Advertising expense Salaries Entertainment expense 137,000 251,000 93,500 481,500 $1,350,250 Income from operationsExplanation / Answer
Solution:
Phoenix Company Flexible Budget Performance Report For the year ended Dec 31, 2017 Particulars Flexible Budget Actual results Variances Fav. / Unfav. Sales $4,500,000.00 $4,563,000.00 $63,000.00 Favorable Variable Costs: Direct Materials $1,100,000.00 $1,116,000.00 $16,000.00 Unfavorable Direct Labor $200,000.00 $208,000.00 $8,000.00 Unfavorable Machinery Repairs $100,000.00 $92,000.00 $8,000.00 Favorable Utilities $80,000.00 $79,250.00 $750.00 Favorable Packaging $120,000.00 $117,000.00 $3,000.00 Favorable Shipping $160,000.00 $153,000.00 $7,000.00 Favorable Total Variable Costs: $1,760,000.00 $1,765,250.00 $5,250.00 Unfavorable Contribution $2,740,000.00 $2,797,750.00 $57,750.00 Favorable Fixed Costs: Depreciation - Plant & Equipment $330,000.00 $330,000.00 $0.00 Neither favorable nor unfavorable Utilities $150,000.00 $148,000.00 $2,000.00 Favorable Plant mangement salaries $200,000.00 $210,000.00 $10,000.00 Unfavorable Sales Salary $260,000.00 $278,000.00 $18,000.00 Unfavorable Advertising Expense $128,000.00 $137,000.00 $9,000.00 Unfavorable Salaries $251,000.00 $251,000.00 $0.00 Neither favorable nor unfavorable Entertainment Expenses $90,000.00 $93,500.00 $3,500.00 Unfavorable Total Fixed Costs $1,409,000.00 $1,447,500.00 $38,500.00 Unfavorable Net Operating Income $1,331,000.00 $1,350,250.00 $19,250.00 Favorable