Tempo Company\'s fixed budget (based on sales of 18,000 units) for the first qua

Question

Tempo Company's fixed budget (based on sales of 18,000 units) for the first quarter of calendar year 2017 reveals the following.

Complete the following flexible budgets for sales volumes of 16,000, 18,000, and 20,000 units

Fixed Budget Sales (18,000 units) $ 3,780,000 Cost of goods sold Direct materials $ 432,000 Direct labor 774,000 Production supplies 504,000 Plant manager salary 232,000 1,942,000 Gross profit 1,838,000 Selling expenses Sales commissions 126,000 Packaging 288,000 Advertising 100,000 514,000 Administrative expenses Administrative salaries 282,000 Depreciation—office equip. 252,000 Insurance 222,000 Office rent 232,000 988,000 Income from operations $ 336,000

Explanation / Answer

TEMPO COMPANY Flexible Budgets For Quarter Ended March 31, 2017 ------Flexible Budget------ ------Flexible Budget at ------ Variable Amount per Unit Total Fixed Cost 16,000 units 18,000 units 20,000 units Sales $210 $3,360,000 $3,780,000 $4,200,000 Variable costs: Direct materials $24 $384,000 $432,000 $480,000 Direct labor $43 $688,000 $774,000 $860,000 Production supplies $28 $448,000 $504,000 $560,000 Sales commissions $7 $112,000 $126,000 $140,000 Packaging $16 $256,000 $288,000 $320,000 Total variable costs $118 $1,888,000 $2,124,000 $2,360,000 Contribution margin $92.00 $1,472,000 $1,656,000 $1,840,000 Fixed costs: Plant manager salary 232,000 232,000 232,000 232,000 Advertising 100,000 100,000 100,000 100,000 Administrative salaries 282,000 282,000 282,000 282,000 Depreciation—office equip. 252,000 252,000 252,000 252,000 Insurance 222,000 222,000 222,000 222,000 Office rent 232,000 232,000 232,000 232,000 Total fixed costs 1,320,000 1,320,000 1,320,000 1,320,000 Income from operations $152,000 $336,000 $520,000

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