Phoenix Company reports the following fixed budget. It is based on an expected production and sales volume of 15,500 units. PHOENIX COMPANY Fixed Budget For Year Ended December 31 Sales $ 3,255,000 Costs Direct materials 1,007,500 Direct labor 232,500 Sales staff commissions 77,500 Depreciation—Machinery 300,000 Supervisory salaries 199,000 Shipping 217,000 Sales staff salaries (fixed annual amount) 251,000 Administrative salaries 611,750 Depreciation—Office equipment 196,000 Income $ 162,750 Required: 1&2. Prepare flexible budgets at sales volumes of 14,500 and 16,500 units. 3. The company’s business conditions are improving. One possible result is a sales volume of 18,500 units. Prepare a simple budgeted income statement if 18,500 units are sold.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Phoenix Company reports the following fixed budget. It is based on an expected production and sales volume of 15,500 units.
| PHOENIX COMPANY | |
| Fixed Budget | |
| For Year Ended December 31 | |
| Sales | $ 3,255,000 |
|---|---|
| Costs | |
| Direct materials | 1,007,500 |
| Direct labor | 232,500 |
| Sales staff commissions | 77,500 |
| 300,000 | |
| Supervisory salaries | 199,000 |
| Shipping | 217,000 |
| Sales staff salaries (fixed annual amount) | 251,000 |
| Administrative salaries | 611,750 |
| Depreciation—Office equipment | 196,000 |
| Income | $ 162,750 |
Required:
1&2. Prepare flexible budgets at sales volumes of 14,500 and 16,500 units.
3. The company’s business conditions are improving. One possible result is a sales volume of 18,500 units. Prepare a simple
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