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

Question

10.

Tempo Company's fixed budget (based on sales of 12,000 units) for the first quarter of calendar year 2017 reveals the following.

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.)

Fixed Budget Sales (12,000 units) $ 2,472,000 Cost of goods sold Direct materials $ 288,000 Direct labor 516,000 Production supplies 336,000 Plant manager salary 88,000 1,228,000 Gross profit 1,244,000 Selling expenses Sales commissions 108,000 Packaging 192,000 Advertising 100,000 400,000 Administrative expenses Administrative salaries 138,000 Depreciation—office equip. 108,000 Insurance 78,000 Office rent 88,000 412,000 Income from operations $ 432,000

Explanation / Answer

Flexible Budget variable total 10,000 12,000 14,000 amount fixed cost units units units per unit Sales 206 2060000 2472000 2884000 Variable costs: Direct materials 24 240000 288000 336000 direct labor 43 430000 516000 602000 production supplies 28 280000 336000 392000 Sales commissions 9 90000 108000 126000 packaging 16 160000 192000 224000 total variable costs 120 1200000 1440000 1680000 contribution margin 86 860000 1032000 1204000 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 260,000 432,000 604,000

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