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Phoenix Companys 2019 master budget included the following fixed budget report. It is based on an expected production and sales volume of 18,000 units.

PHOENIX COMPANY Fixed Budget Report For Year Ended December 31, 2019
Sales				$	3,600,000
Cost of goods sold
Direct materials	$	900,000
Direct labor		180,000
Machinery repairs (variable cost)		54,000
DepreciationPlant equipment (straight-line)		315,000
Utilities ($36,000 is variable)		196,000
Plant management salaries		200,000			1,845,000
Gross profit					1,755,000
Selling expenses
Packaging		72,000
Shipping		108,000
Sales salary (fixed annual amount)		260,000			440,000
General and administrative expenses
Advertising expense		130,000
Salaries		251,000
Entertainment expense		110,000			491,000
Income from operations				$	824,000

Phoenix Companys actual income statement for 2019 follows.

PHOENIX COMPANY Statement of Income from Operations For Year Ended December 31, 2019
Sales (21,000 units)				$	4,248,000
Cost of goods sold
Direct materials	$	1,066,000
Direct labor		218,000
Machinery repairs (variable cost)		54,000
DepreciationPlant equipment (straight-line)		315,000
Utilities (fixed cost is $157,000)		198,000
Plant management salaries		209,000			2,060,000
Gross profit					2,188,000
Selling expenses
Packaging		81,750
Shipping		118,500
Sales salary (annual)		278,000			478,250
General and administrative expenses
Advertising expense		137,000
Salaries		251,000
Entertainment expense		113,000			501,000
Income from operations				$	1,208,750

Required: 1. Prepare a flexible budget performance report for 2019. (Indicate the effect of each variance by selecting for favorable, unfavorable, and No variance.)

Required: 1&2. Prepare flexible budgets for the company at sales volumes of 14,000 and 16,000 units and classify all items listed in the fixed budget as variable or fixed.

3. The companys 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 $579,000 if this level is reached without increasing capacity?

4. An unfavorable change in business is remotely possible; in this case, production and sales volume for the year could fall to 12,000 units. How much income (or loss) from operations would occur if sales volume falls to this level

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