The following Information applies to the questions displayed below. Phoenix Comp
ID: 2562606 • Letter: T
Question
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 $ 3,000,000 Sales Cost of goods sold $900,000 Direct materials Direct labor Machinery repairs (variable cost) Depreciation-plant equipment (straight-line) Utilities ($45,000 is variable) Plant management salaries 225,000 60,000 300,000 210,000 180,000 1875,000 Gross profit Selling expenses 1,125,000 Packaging Shipping Sales salary (fixed annual amount) 75,000 90,000 235,000 400,000 General and administrative expenses Advertising expense Salaries Entertainment expense 25,000 241,000 85,000 451,000 Income from operations $ 274,000Explanation / Answer
Solution:
Part 1&2 --- Flexible Budget for sales volume 14,000 units and 16,000 units
PHOENIX COMPANY
Fixed Budget Report
For Year Ended December 31, 2015
Flexible Budget
Flexible Budget for:
Variable Amount per unit (q)
Total Fixed Cost
Units Sales of 14,000
(14,000q)
Units Sales of 16,000
(16,000q)
Sales
$200
$2,800,000
$3,200,000
Variable Costs:
Direct materials
$60
$840,000
$960,000
Direct labor
$15
$210,000
$240,000
Machinery repair (variable cost)
$4
$56,000
$64,000
Utilities
$3
$42,000
$48,000
Packing Expense
$5
$70,000
$80,000
Shipping Expense
$6
$84,000
$96,000
Total Variable Costs
$93
$1,302,000
$1,488,000
Fixed Costs:
Depreciation -plant equipment
$300,000
$300,000
$300,000
Utilities
$165,000
$165,000
$165,000
Plant management salaries
$180,000
$180,000
$180,000
Sales Salary
$235,000
$235,000
$235,000
Advertising Expense
$125,000
$125,000
$125,000
Salaries
$241,000
$241,000
$241,000
Entertainment Expense
$85,000
$85,000
$85,000
Total Fixed Costs
$1,331,000
$1,331,000
$1,331,000
TOTAL COSTS (Variable + Fixed)
$2,633,000
$2,819,000
Operating Profit (Sales - total costs)
$167,000
$381,000
Part 3 --- Forecasted Contribution Margin Income Statement
PHOENIX COMPANY
Forecasted Contribution Margin Income Statement
For Year Ended December 31, 2015
Sales (in units)
15,000
18,000
Contribution Margin (per unit)
$107
$107
Contribution Margin
$1,605,000
$1,926,000
Fixed Costs
$1,331,000
$1,331,000
Expected Increase in Operating Income
$274,000
$595,000
$321,000
Contribution Margin per unit = Unit Selling Price $200 – Unit Variable Cost $93 = $107
Part 4 --- Forecasted Contribution Margin Income Statement
PHOENIX COMPANY
Forecasted Contribution Margin Income Statement
For Year Ended December 31, 2015
Sales (in units)
15,000
12,000
Contribution Margin (per unit)
$107
$107
Contribution Margin
$1,605,000
$1,284,000
Fixed Costs
$1,331,000
$1,331,000
Operating Income (loss)
$274,000
-$47,000
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PHOENIX COMPANY
Fixed Budget Report
For Year Ended December 31, 2015
Flexible Budget
Flexible Budget for:
Variable Amount per unit (q)
Total Fixed Cost
Units Sales of 14,000
(14,000q)
Units Sales of 16,000
(16,000q)
Sales
$200
$2,800,000
$3,200,000
Variable Costs:
Direct materials
$60
$840,000
$960,000
Direct labor
$15
$210,000
$240,000
Machinery repair (variable cost)
$4
$56,000
$64,000
Utilities
$3
$42,000
$48,000
Packing Expense
$5
$70,000
$80,000
Shipping Expense
$6
$84,000
$96,000
Total Variable Costs
$93
$1,302,000
$1,488,000
Fixed Costs:
Depreciation -plant equipment
$300,000
$300,000
$300,000
Utilities
$165,000
$165,000
$165,000
Plant management salaries
$180,000
$180,000
$180,000
Sales Salary
$235,000
$235,000
$235,000
Advertising Expense
$125,000
$125,000
$125,000
Salaries
$241,000
$241,000
$241,000
Entertainment Expense
$85,000
$85,000
$85,000
Total Fixed Costs
$1,331,000
$1,331,000
$1,331,000
TOTAL COSTS (Variable + Fixed)
$2,633,000
$2,819,000
Operating Profit (Sales - total costs)
$167,000
$381,000