Tempo Company\'s fixed budget (based on sales of 14,000 units) for the first qua

Question

Tempo Company's fixed budget (based on sales of 14,000 units) for the first quarter of calendar year 2017 reveals the following.

Fixed Budget Sales (14,000 units) $ 3,066,000 Cost of goods sold Direct materials $ 350,000 Direct labor 616,000 Production supplies 392,000 Plant manager salary 150,000 1,508,000 Gross profit 1,558,000 Selling expenses Sales commissions 112,000 Packaging 224,000 Advertising 100,000 436,000 Administrative expenses Administrative salaries 200,000 Depreciation—office equip. 170,000 Insurance 140,000 Office rent 150,000 660,000 Income from operations $ 462,000 TEMPO COMPANY Flexible Budgets For Quarter Ended March 31, 2017 ------Flexible Budget------ ------Flexible Budget at ------ Variable Amount per Unit Total Fixed Cost 12,000 units 14,000 units 16,000 units Variable costs: Fixed costs:

Explanation / Answer

TEMPO COMPANY Flexible Budgets For Quarter Ended March 31, 2017 ------Flexible Budget------ ------Flexible Budget at ------ Variable Amount per Unit Total Fixed Cost 12,000 units 14,000 units 16,000 units Sales $219 $2,628,000 $3,066,000 $3,504,000 Variable costs: Direct materials $25 $300,000 $350,000 $400,000 Direct labor $44 $528,000 $616,000 $704,000 Production supplies $28 $336,000 $392,000 $448,000 Sales commissions $8 $96,000 $112,000 $128,000 Packaging $16 $192,000 $224,000 $256,000 Total variable costs $121 1452000 1694000 1936000 Contribution margin $98.00 1,176,000 1,372,000 1,568,000 Fixed costs: Plant manager salary 150,000 150,000 150,000 150,000 Advertising 100,000 100,000 100,000 100,000 Administrative salaries 200,000 200,000 200,000 200,000 Depreciation—office equip. 170,000 170,000 170,000 170,000 Insurance 140,000 140,000 140,000 140,000 Office rent 150,000 150,000 150,000 150,000 Total fixed costs 910,000 910,000 910,000 910,000 Income from operations $266,000 $462,000 $658,000

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