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 Fixed Budget $2,496,000 Sales (12,000 units) Cost of goods sold Direct materials Direct lab r Production supplies Plant manager salary $300,000 516,000 324,000 100,000 1,240, 000 1,256, 000 Gross profit Selling expenses Sales commissions Packaging Advertising 108,000 180,000 100,000 388,000 Administrative expenses Administrative salaries Depreciation-office equip. Insurance Office rent 150,000 120,000 90,000 100,000 460,000 $ 408,000 Income from operations 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

tempo company

flexible budget

variable amount

per unit

$586000

flexible budget flexible budget at

variable amount

per unit

total fixed cost 10000 units 12000 units 14000 units sales (2496000/12000) 208 2080000 2496000 2912000 variable cost: direct material (300000 / 12000) 25 250000 300000 350000 direct labour (516000/ 12000) 43 430000 516000 602000 production supplies (324000/12000) 27 270000 324000 378000 sales commission (108000/12000) 9 90000 108000 126000 packaging (180000/12000) 15 150000 180000 210000 total variable cost 119 1190000 1428000 1666000 contribution margin (sales - total variable cost) 89 890000 1068000 1246000 Fixed cost : plant manager salary 100000 100000 100000 100000 advertising 100000 100000 100000 100000 administrative salaries 150000 150000 150000 150000 depreciation- office equipment 120000 120000 120000 120000 insurance 90000 90000 90000 90000 office rent 100000 100000 100000 100000 Total fixed cost 660000 660000 660000 660000 income from operations (contribution - total fixed cost) $230000 $408000

$586000

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