Question

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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				$	3,150,000
Cost of goods sold
Direct materials	$	975,000
Direct labor		225,000
Machinery repairs (variable cost)		60,000
Depreciation—Plant equipment (straight-line)		315,000
Utilities ($30,000 is variable)		210,000
Plant management salaries		210,000			1,995,000
Gross profit					1,155,000
Selling expenses
Packaging		75,000
Shipping		105,000
Sales salary (fixed annual amount)		235,000			415,000
General and administrative expenses
Advertising expense		125,000
Salaries		230,000
Entertainment expense		90,000			445,000
Income from operations				$	295,000

Required:
1&2. Prepare flexible budgets for the company at sales volumes of 14,000 and 16,000 units and classify all items listed in the fixed budget as variable or fixed.

PHOENIX COMPANY
Fixed Budget Report
For Year Ended December 31, 2017
	Flexible Budget		Flexible Budget for:
	Variable Amount per Unit	Total Fixed Cost	Units Sales of 14,000	Unit Sales of 16,000
Sales
Variable costs
Direct materials
Direct labor
Machinery repairs
Utilities
Packaging
Shipping
	0.00		0	0
Fixed costs
Depreciation—Plant equipment (straight-line)
Utilities
Plant management salaries
Sales salary
Advertising expense
Salaries
Entertainment expense
		$0	$0	$0

Answer 1