Problem 21-1A Preparing and analyzing a flexible budget A P 1 Phoenix Company's 2019 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 Fixed Budget Report For Year Ended December 31, 2019 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 1,955,000 1,045,000 430,000 Fixed Budget Report For Year Ended December 31, 2019 $3,000,000 $975,000 225,000 60,000 300,000 195,000 200,000 1,955,000 1,045,000 Sales Cost of goods sold Direct materials Direct labor Machinery repairs (variable cost) Depreciation-Plant equipment (straight-line) Utilities ($45,000 is variable) Plant management salaries Gross profit Selling expenses Packaging Shipping Sales salary (fixed annual amount) General and administrative expenses Advertising expense Salaries Entertainment expense Income from operations 75,000 105,000 250,000 430,000 125,000 241,000 90,000 456,000 $ 159.000 Required 1. Classify all items listed in the fixed budget as variable or fixed. Also determine their amounts per unit or their amounts for the year, as appropriate. Page 859 2. Prepare flexible budgets (see Exhibit 21.3) for the company at salds volumes of 14,000 and 16,000 units. Check (2) Budgeted income at 16,000 units, $260,000 any'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 budgeted amount of $159,000 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? (4) Potential operating loss, $(144,000)