Tempo Company\'s fixed budget (based on sales of 12,000 units) for the first qua

Question

Tempo Company's fixed budget (based on sales of 12,000 units) for the first quarter of calendar year 2017 reveals the following. $2,580,000 Sales (12,000 units) Cost of goods sold Direct materials Direct labor Production supplies Plant manager salary $288,000 516,000 324,000 88,000 1,216,000 1,364,000 Gross profit Selling expenses Sales commissions Packaging Advertising 84,000 192,000 100,000376,000 Administrative expenses 138,000 108,000 Administrative salaries Depreciation-office equip. Insurance Office rent 78,000 88000412,000 $ 576,000 Income from operations

Explanation / Answer

FLEXIBLE BUDGET 10000 Units 12000 Units 14000 Units Variable cost PU Total FC Sales 215 2150000 2580000 3010000 Variable cost: Direct material 24 240000 288000 336000 Direct labour 43 430000 516000 602000 Production Supplies 28.5 285000 342000 399000 Sales commission 7 70000 84000 98000 Packaging 16 160000 192000 224000 Total Variable cost 118.5 1185000 1422000 1659000 Contribution margin 96.5 965000 1158000 1351000 Fixed cost Plant manager salary 88000 88000 88000 88000 Advertising 100000 100000 100000 100000 Admin salaries 138000 138000 138000 138000 Depreciation 108000 108000 108000 108000 Insurance 78000 78000 78000 78000 Office rent 88000 88000 88000 88000 Total Fixed cost 600,000 600,000 600,000 600,000 Income from operations 365000 558000 751000

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