PHOENIX COMPANY_Flexible budget

| September 29, 2018

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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