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.

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

Answer 1