. The company's business conditions are improving. One possible result is a sales volume of 18,000 units. The company president is onfident that this volume is within the relevant range of existing capacity. How much would operating income increase over the udgeted amount of $159,000 if this level is reached without increasing capacity?
. The company's business conditions are improving. One possible result is a sales volume of 18,000 units. The company president is onfident that this volume is within the relevant range of existing capacity. How much would operating income increase over the udgeted amount of $159,000 if this level is reached without increasing capacity?
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter8: Budgeting
Section: Chapter Questions
Problem 6PA: Budgeted income statement and balance sheet As a preliminary to requesting budget estimates of...
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Transcribed Image Text:3. The company's business conditions are improving. One possible result is a sales volume of 18,000 units. The company president is
confident that this volume is within the relevant range of existing capacity. How much would operating income increase over the
budgeted amount of $159,000 if this level is reached without increasing capacity?
X Answer is not complete.
PHOENIX COMPANY
Forecasted Contribution Margin Income Statement
For Year Ended December 31, 2019
Sales (in units)
Contribution margin (per
unit)
Contribution margin
15,000
18,000
$
101.00
$
101.00
Fixed costs
Operating income
![!
Required information
[The following information applies to the questions displayed below.]
Phoenix Company's 2019 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, 2019
Sales
$3,000,000
Cost of goods sold
Direct materials
$975,000
225,000
60,000
300,000
195,000
200,000
Direct labor
Machinery repairs (variable cost)
Depreciation-Plant equipment (straight-line)
Utilities ($45,000 is variable)
Plant management salaries
Gross profit
Selling expenses
Packaging
Shipping
Sales salary (fixed annual amount)
General and administrative expenses
Advertising expense
Salaries
Entertainment expense
1,955,000
1,045,000
75,000
105,000
250,000
430,000
125,000
241,000
90,000
456,000
159,000
Income from operations
$
3. The company's business conditions are improving. One possible result is a sales volume of 18,000 units. The company president is
confident that this volume is within the relevant range of existing capacity. How much would operating income increase over the
budgeted amount of $159,000 if this level is reached without increasing capacity?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4a0cdaf2-3070-4739-98e3-9e022e7682dd%2F9040cfdb-5d83-41b1-8268-55e4bb822fd0%2Fgiye75c_processed.jpeg&w=3840&q=75)
Transcribed Image Text:!
Required information
[The following information applies to the questions displayed below.]
Phoenix Company's 2019 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, 2019
Sales
$3,000,000
Cost of goods sold
Direct materials
$975,000
225,000
60,000
300,000
195,000
200,000
Direct labor
Machinery repairs (variable cost)
Depreciation-Plant equipment (straight-line)
Utilities ($45,000 is variable)
Plant management salaries
Gross profit
Selling expenses
Packaging
Shipping
Sales salary (fixed annual amount)
General and administrative expenses
Advertising expense
Salaries
Entertainment expense
1,955,000
1,045,000
75,000
105,000
250,000
430,000
125,000
241,000
90,000
456,000
159,000
Income from operations
$
3. The company's business conditions are improving. One possible result is a sales volume of 18,000 units. The company president is
confident that this volume is within the relevant range of existing capacity. How much would operating income increase over the
budgeted amount of $159,000 if this level is reached without increasing capacity?
Expert Solution
Step 1 Flexible Budget for 2019
| Phoenix Company | ||||
| Flexible Budget for 2019 | ||||
| Flexible Budget | ||||
| Flexible Budget For | ||||
| Particulars | Variable amount per unit | Total Fixed Cost | Volume - 14000 units | Volume - 16000 units |
| Sales | $200.00 | $2,800,000.00 | $3,200,000.00 | |
| Variable costs: | ||||
| Direct materials | $65.00 | $910,000.00 | $1,040,000.00 | |
| Direct labor | $15.00 | $210,000.00 | $240,000.00 | |
| Machinery repairs | $4.00 | $56,000.00 | $64,000.00 | |
| Utilities | $3.00 | $42,000 | $48,000.00 | |
| Packaging | $5.00 | $70,000.00 | $80,000.00 | |
| Shipping | $7.00 | $98,000.00 | $112,000.00 | |
| Total Variable costs | $99.00 | $1,386,000 | $1,584,000.00 | |
| Contribution margin | $101.00 | $1,414,000.00 | 1,616,000.00 | |
| Fixed Costs: | ||||
| Depreciation—Plant equipment | $300,000.00 | $300,000.00 | $300,000.00 | |
| Utilities | $150,000.00 | $150,000.00 | $150,000.00 | |
| Plant management salaries | $200,000.00 | $200,000.00 | $200,000.00 | |
| Sales Salaries | $250,000.00 | $250,000.00 | $250,000.00 | |
| Advertising expense | $125,000.00 | $125,000.00 | $125,000.00 | |
| Salaries | $241,000.00 | $241,000.00 | $241,000.00 | |
| Entertainment expense | $90,000.00 | $90,000.00 | $90,000.00 | |
| Total Fixed Costs | $1,356,000.00 | $1,356,000.00 | $1,356,000.00 | |
| Net Operating Income | $58,000.00 | $260,000.00 | ||
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