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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