Tempo Company\'s fixed budget (based on sales of 10,000 units) for the first qua

Question

Tempo Company's fixed budget (based on sales of 10,000 units) for the first quarter of calendar year 2017 reveals the following Fixed Budget Sales (10,000 units) Cost of goods sold $2,010,000 Direct materials Direct labor Production supplies Plant manager salary $250,000 430,000 270,000 50,000 1,000,000 1,010,000 Gross profit Selling expenses Sales commissions Packaging Advertising 80,000 160,000 100, 000 340,000 Administrative expenses Administrative salaries Depreciation-office equip. Insurance Office rent 100,000 70,000 40,000 50,000 260 000 $ 410,000 Income from operations

Explanation / Answer

TEMPO COMPANY Flexible Budgets For Quarter Ended March 31, 2017 ------Flexible Budget------ ------Flexible Budget at ------ Variable Amount per Unit Total Fixed Cost 8,000 units 10,000 units 12,000 units Sales 201 1608000 2010000 2412000 Variable costs: Direct materials 25 200000 250000 300000 Direct labor 43 344000 430000 516000 Production supplies 27 216000 270000 324000 Sales commissions 8 64000 80000 96000 Packaging 16 128000 160000 192000 Total variable costs 119 952000 1190000 1428000 Contribution margin 82 656000 820000 984000 Fixed costs: Plant manager salary 50,000 50,000 50,000 50,000 Advertising 100,000 100,000 100,000 100,000 Administrative salaries 100,000 100,000 100,000 100,000 Depreciation—office equip. 70,000 70,000 70,000 70,000 Insurance 40,000 40,000 40,000 40,000 Office rent 50,000 50,000 50,000 50,000 Total fixed costs 410000 410000 410000 410000 Income from operations $246,000 $410,000 $574,000

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