Tempo Company\'s fixed budget (based on sales of 12,000 units) for the first qua
ID: 2557633 • Letter: T
Question
Tempo Company's fixed budget (based on sales of 12,000 units) for the first quarter of calendar year 2017 reveals the following sales (12, 000 units) Cost of goods sold 2,556, 000 Direct materials Direct labor Production supplies Plant manager salary $288,000 528,000 336,000 88,000 1,240,000 1,316, 000 Gross profit Selling expenses Sales commissions Packaging Advertising 96,000 192,000 100,000 3 388, 000 Administrative expenses Administrative salaries Depreciation-office oquip Insurance office rent 130,000 108,000 78,000 412, 000 516, 000 Income from operations S Complete the following flexible budgets for sales volumes of 10,000. 12.000, and 14,000 units. (Round cost per unit to 2 decimal places.)Explanation / Answer
Solution:
TEMPO COMPANY
Flexible Budgets
For Quarter Ended March 31, 2017
------Flexible Budget------
------Flexible Budget at ------
Variable Amount per Unit
Total Fixed Cost
10,000 units
12,000 Units
14,000 Units
Sales
$ 213*
$ 2,130,000
$ 2,556,000
$ 2,982,000
Variable costs:**
Direct materials
24
240,000
288,000
336,000
Direct labor
44
440,000
528,000
616,000
Production supplies
28
280,000
336,000
392,000
Sales commission
8
80,000
96,000
112,000
Packaging
16
160,000
192,000
224,000
Total variable costs
120
1,200,000
1,440,000
1,680,000
Contribution margin
$ 93
930,000
1,116,000
1,302,000
Fixed costs:
Plant manager salary
88,000
88,000
88,000
88,000
Advertising
100,000
100,000
100,000
100,000
Administrative salaries
138,000
138,000
138,000
138,000
Depreciation—office equip.
108,000
108,000
108,000
108,000
Insurance
78,000
78,000
78,000
78,000
Office rent
88,000
88,000
88,000
88,000
Total fixed costs
600,000
600,000
600,000
600,000
Income from operations
(Contribution margin – Total fixed cost)
$ 330,000
$ 516,000
$ 702,000
*Sale per unit = $ 2,556,000 / 12,000 units = $ 213 per unit
** Variable costs:
-Direct materials per unit = $ 288,000 / 12,000 units = $ 24 per unit-
- Direct labor per unit = $ 528,000 / 12,000 units = $ 44 per unit
-Production supplies= $ 336,000/ 12,000 units = $ 28 per unit
- Sales commission = $ 96,000/ 12,000 units = $ 8 per unit
- Packaging = $ 192,000/ 12,000 units = $ 16 per unit
TEMPO COMPANY
Flexible Budgets
For Quarter Ended March 31, 2017
------Flexible Budget------
------Flexible Budget at ------
Variable Amount per Unit
Total Fixed Cost
10,000 units
12,000 Units
14,000 Units
Sales
$ 213*
$ 2,130,000
$ 2,556,000
$ 2,982,000
Variable costs:**
Direct materials
24
240,000
288,000
336,000
Direct labor
44
440,000
528,000
616,000
Production supplies
28
280,000
336,000
392,000
Sales commission
8
80,000
96,000
112,000
Packaging
16
160,000
192,000
224,000
Total variable costs
120
1,200,000
1,440,000
1,680,000
Contribution margin
$ 93
930,000
1,116,000
1,302,000
Fixed costs:
Plant manager salary
88,000
88,000
88,000
88,000
Advertising
100,000
100,000
100,000
100,000
Administrative salaries
138,000
138,000
138,000
138,000
Depreciation—office equip.
108,000
108,000
108,000
108,000
Insurance
78,000
78,000
78,000
78,000
Office rent
88,000
88,000
88,000
88,000
Total fixed costs
600,000
600,000
600,000
600,000
Income from operations
(Contribution margin – Total fixed cost)
$ 330,000
$ 516,000
$ 702,000
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