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.


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.


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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