PHOENIX COMPANY_Flexible Budget

Problem 23-4A Preparation and analysis of a flexible budget performance report LO P1, P2, A1

Phoenix Company’s 2013 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, 2013     Sales       $ 4,250,000   Cost of goods sold                Direct materials $ 975,000            Direct labor   240,000            Machinery repairs (variable cost)   60,000            Depreciation—plant equipment   315,000            Utilities ($55,000 is variable)   215,000            Plant management salaries   215,000     2,020,000               Gross profit         2,230,000   Selling expenses                Packaging   80,000            Shipping   110,000            Sales salary (fixed annual amount)   250,000     440,000               General and administrative expenses                Advertising expense   126,000            Salaries   251,000            Entertainment expense   100,000     477,000               Income from operations       $ 1,313,000

 

Phoenix Company’s actual income statement for 2013 follows.

 

PHOENIX COMPANY Statement of Income from Operations For Year Ended December 31, 2013

 

Sales (20,000 units)				$	5,063,000
Cost of goods sold
Direct materials	$	1,163,059
Direct labor		291,353
Machinery repairs (variable cost)		61,588
Depreciation—plant equipment		315,000
Utilities (fixed cost is $158,000)		221,706
Plant management salaries		226,000			2,278,706
Gross profit					2,784,294
Selling expenses
Packaging		91,368
Shipping		122,412
Sales salary (annual)		269,000			482,780
General and administrative expenses
Advertising expense		135,000
Salaries		251,000
Entertainment expense		103,500			489,500
Income from operations				$	1,812,014

 

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