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Tohono Company's 2013 master budget included the following fixed budget report. It is based on an expected production and sales volume of 20,000 units.
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.
2. Prepare flexible budgets (see Exhibit 23.3) for the company at sales volumes of 18,000 and 24,000 units.
3. The company's business conditions are improving. One possible result is a sales volume of approximately 28,000 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 2013 budgeted amount of $ 125,000 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 2013 could fall to 14,000 units. How much income (or loss) from operations would occur if sales volume falls to this level?
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