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 2015 reveals the following Fixed Budget $2,954,000 Sales (14,000 units) Cost of goods sold Direct materials Direct labor Production supplies Plant manager salary $ 322,000 602,000 378,000 122,000 424,000 1,530,000 Gross proft Selling expenses Sales commissions Packaging Advertising 112,000 210,000 100,000 422,000 Administrative expenses 172,000 142,000 112,000 122,000 Administrative salaries Depreciation office equip Insurance Office rent 548,000 Income from operations $560,000

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 211 2532000 2954000 3376000 Variable costs: Direct materials 23 276000 322000 368000 Direct labor 43 516000 602000 688000 Production supplies 27 324000 378000 432000 Sales commissions 8 96000 112000 128000 Packaging 15 180000 210000 240000 Total variable costs 116 1392000 1624000 1856000 Contribution margin 95 1140000 1330000 1520000 Fixed costs: Plant manager salary 1,22,000 1,22,000 1,22,000 1,22,000 Advertising 1,00,000 1,00,000 1,00,000 1,00,000 Administrative salaries 1,72,000 1,72,000 1,72,000 1,72,000 Depreciation—office equip. 1,42,000 1,42,000 1,42,000 1,42,000 Insurance 1,12,000 1,12,000 1,12,000 1,12,000 Office rent 1,22,000 1,22,000 1,22,000 1,22,000 Total fixed costs 7,70,000 7,70,000 7,70,000 7,70,000 Income from operations 3,70,000 5,60,000 7,50,000

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