Question

Phoenix Company’s 2017 master budget included the following fixed budget report. It is based on an...

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.

PHOENIX COMPANY
Fixed Budget Report
For Year Ended December 31, 2017
Sales $ 4,250,000
Cost of goods sold
Direct materials $ 850,000
Direct labor 340,000
Machinery repairs (variable cost) 51,000
Depreciation—Plant equipment (straight-line) 315,000
Utilities ($34,000 is variable) 184,000
Plant management salaries 215,000 1,955,000
Gross profit 2,295,000
Selling expenses
Packaging 68,000
Shipping 102,000
Sales salary (fixed annual amount) 250,000 420,000
General and administrative expenses
Advertising expense 127,000
Salaries 261,000
Entertainment expense 110,000 498,000
Income from operations $ 1,377,000

Phoenix Company’s actual income statement for 2017 follows.

PHOENIX COMPANY
Statement of Income from Operations
For Year Ended December 31, 2017
Sales (20,000 units) $ 5,078,000
Cost of goods sold
Direct materials $ 1,016,000
Direct labor 408,000
Machinery repairs (variable cost) 52,000
Depreciation—Plant equipment (straight-line) 315,000
Utilities (fixed cost is $147,000) 186,250
Plant management salaries 224,000 2,201,250
Gross profit 2,876,750
Selling expenses
Packaging 78,000
Shipping 112,000
Sales salary (annual) 267,000 457,000
General and administrative expenses
Advertising expense 136,000
Salaries 261,000
Entertainment expense 114,000 511,000
Income from operations $ 1,908,750


Required:
1. Prepare a flexible budget performance report for 2017.

PHOENIX COMPANY
Flexible Budget Performance Report
For Year Ended December 31, 2017
Flexible Budget Actual Results Variances Fav. / Unfav.
Variable costs
Fixed costs

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