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Required information [The following information applies to the questions displayed below.] Phoenix Company's 2017 master budget included the following fixed budget report. It is based on an expected production and sales volume of 15,000 units. $3,000,000 PHOENIX COMPANY Fixed Budget Report For Year Ended December 31, 2017 Sales Cost of goods sold Direct materials $975,000 Direct labor 225,000 Machinery repairs (variable cost) 60,000 Depreciation-Plant equipment (straight-line) 300,000 Utilities ($45,000 is variable) 195,000 Plant management salaries 200,000 Gross profit Selling expenses Packaging 75,000 Shipping 105,000 Sales salary (fixed annual amount) 250,000 General and administrative expenses Advertising expense 125,000 Salaries 241,000 Entertainment expense 90,000 Income from operations 1,955,000 1,045,000 430,000 456,000 159,000 $ 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. PHOENIX COMPANY Fixed Budget Report For Year Ended December 31, 2017 Flexible Budget Variable Total Fixed Amount per Unit Cost $ 200.00 Flexible Budget for: Units Sales Unit Sales of of 14,000 16,000 2,800,000 $ 3,200,000 65.00 15.00 Sales Variable costs Direct materials Direct labor Machinery repairs Utilities Packaging Shipping 4.00 3.00 5.00 7.00 910,000 210,000 56,000 42,000 70,000 98,000 1,040,000 240,000 64,000 48,000 80,000 112,000 1,386,000 1,584,000 99.00 101.00 300,000 150.000 Total variable costs Contribution margin Fixed costs DepreciationPlant equipment (straight-line) Utilities Plant management salaries Sales salary Advertising expense Salaries Entertainment expense 200,000 250,000 125,000 241,000 90,000 $ 1,356,000 Total fixed costs Income from operations $ $ 0 58,000 $ $ 260,000 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 2017 budgeted amount of $159,000 if this level is reached without increasing capacity? PHOENIX COMPANY Forecasted Contribution Margin Income Statement For Year Ended December 31, 2017 Sales (in units) 15,000 18,000 Contribution margin (per unit) "1515000.00 "1515000.00 Contribution margin $ 1,356,000 Fixed costs Operating income $