Tempo Company\'s fixed budget for the first quarter of calendar yeat 2015 reveal

Question

Tempo Company's fixed budget for the first quarter of calendar yeat 2015 reveals the following:

Prepare flexible budgets that show variable costs per unit, fixed costs, and three different flexible budgets for sales volumes of 12,000, 14,000, and 16,000 units.

Sales (14,000) units $3,038,000 Cost of Goods Sold Direct materials $334,600 Direct labor 607,600 Production supplies 394,800 Plant manager salary 91,000 1,428,000 Gross profit 1,610,000 Selling expenses Sales commissions 121,800 Packaging 212,800 Advertising 85,000 419,600 Administrative expenses Administrative salaries 182,000 Depreciation-office equipment 152,000 Insurace 97,000 Office rent 109,000 540,000 Income from operations $650,400

Explanation / Answer

TEMPO COMPANY Flexible Budgets For Quarter Ended March 31, 2015 ------Flexible Budget------ ------Flexible Budget at ------ Variable Amount per Unit Total Fixed Cost 12,000 units 14,000 units 16,000 units Sales $217 $2,604,000 $3,038,000 $3,472,000 Variable costs: Direct materials $24 $286,800 $334,600 $382,400 Direct labor $43 $520,800 $607,600 $694,400 Production supplies $28 $338,400 $394,800 $451,200 Sales commissions $9 $104,400 $121,800 $139,200 Packaging $15 $182,400 $212,800 $243,200 Total variable costs $119 $1,432,800 $1,671,600 $1,910,400 Contribution margin $97.60 $1,171,200 $1,366,400 $1,561,600 Fixed costs: Plant manager salary 91,000 91,000 91,000 91,000 Advertising 85,000 85,000 85,000 85,000 Administrative salaries 182,000 182,000 182,000 182,000 Depreciation—office equip. 152,000 152,000 152,000 152,000 Insurance 97,000 97,000 97,000 97,000 Office rent 109,000 109,000 109,000 109,000 Total fixed costs 716,000 716,000 716,000 716,000 Income from operations $455,200 $650,400 $845,600

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