Problem 232A Preparation and analysis of a flexible budget p

Problem 23-2A Preparation and analysis of a flexible budget performance report LO P1, P2, A1 Phoenix Company\'s 2017 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, 2017 Sales Cost of goods sold $3,375,000 Direct materials Direct labor Machinery repairs (variable cost) Depreciation-Plant equipment (straight-line) Utilities ($60,000 is variable) Plant management salaries $ 750,000 225,000 75,000 315,000 210,000 200,000 1,775,000 1,600,000 Gross profit Selling expenses Packaging Shipping Sales salary (fixed annual amount) 90,000 120,000 260,000 470,000 General and administrative expenses Advertising expense Salaries Entertainment expense 133,000 241,000 100,000 474,988 Income from operations $ 656,000

Solution

Flexible budget performance report flexible actual Varianace fav/unfav budget results Sales (3375000/15000)*18000 4050000 4,113,000 63,000 F Variable costs Direct materials (750000/15000)*18000 900000 917,000 17,000 U direct labor (225000/15000)*18000 270000 277,000 7,000 U machinery repairs (75000/15000)*18000 90000 81,000 9,000 F utilities (60000/15000)*18000 72000 71250 750 F packaging (90000/15000)*18000 108000 105,500 2,500 F shipping (120000/15000)*18000 144000 137,000 7,000 F total variable costs 1584000 1588750 4,750 U contribution margin 2466000 2524250 58,250 F Fixed costs 0 Depreciation - plant Equipment 315,000 315,000 0 N Utilities 150000 147,000 3,000 F plant management salaries 200,000 211,000 11,000 U Sales salary 260,000 278,000 18,000 U Advertising 133,000 141,000 8,000 U Salaries 241,000 241,000 0 N Entertainment expense 100,000 103,500 3,500 U total fixed cost 1,399,000 1,436,500 37,500 U income from operations 1,067,000 1,087,750 20,750 F