Problem 8-2A Preparation and analysis of a flexible budget performance report LO P1, P2, A1

Phoenix Companys 2017 master budget included the following fixed budget report. It is based on an expected production and sales volume of 16,000 units.

PHOENIX COMPANY Fixed Budget Report For Year Ended December 31, 2017
Sales				$	3,600,000
Cost of goods sold
Direct materials	$	1,120,000
Direct labor		240,000
Machinery repairs (variable cost)		64,000
DepreciationPlant equipment (straight-line)		300,000
Utilities ($48,000 is variable)		208,000
Plant management salaries		230,000			2,162,000
Gross profit					1,438,000
Selling expenses
Packaging		80,000
Shipping		112,000
Sales salary (fixed annual amount)		260,000			452,000
General and administrative expenses
Advertising expense		134,000
Salaries		251,000
Entertainment expense		110,000			495,000
Income from operations				$	491,000

Phoenix Companys actual income statement for 2017 follows.

PHOENIX COMPANY Statement of Income from Operations For Year Ended December 31, 2017
Sales (19,000 units)				$	4,338,000
Cost of goods sold
Direct materials	$	1,347,000
Direct labor		293,000
Machinery repairs (variable cost)		68,000
DepreciationPlant equipment (straight-line)		300,000
Utilities (fixed cost is $157,500)		213,750
Plant management salaries		240,000			2,461,750
Gross profit					1,876,250
Selling expenses
Packaging		92,750
Shipping		126,000
Sales salary (annual)		276,000			494,750
General and administrative expenses
Advertising expense		142,000
Salaries		251,000
Entertainment expense		113,500			506,500
Income from operations				$	875,000

Required: 1. Prepare a flexible budget performance report for 2017.

PHOENIX COMPANY Flexible Budget Performance Report For Year Ended December 31, 2017 Flexible Budget Actual ResultsVariances Fav./ Unfav Sales Favorable Variable costs Shipping Favorable Utilities Favorable Direct labor Unfavorable Direct materials Unfavorable Machinery repairs Favorable Packaging Favorable Total variable costs 0 Unfavorable Contribution margin Favorable Fixed costs Unfavorable Advertising expense Depreciation-Plant equipment (straight-line) No variance Entertainment expense Unfavorable Plant management salaries Unfavorable Salaries No variance Sales salary Unfavorable Utilities Favorable Total fixed costs 0 Unfavorable Favorable Income from operations