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
Sales (12,000 units)						$	2,436,000
Cost of goods sold
Direct materials		$	288,000
Direct labor			516,000
Production supplies			324,000
Plant manager salary			88,000				1,216,000
Gross profit							1,220,000
Selling expenses
Sales commissions			96,000
Packaging			192,000
Advertising			100,000				388,000
Administrative expenses
Administrative salaries			138,000
Depreciation—office equip.			108,000
Insurance			78,000
Office rent			88,000				412,000
Income from operations						$	420,000

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.)

Answer 1

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	203		2,030,000	2,436,000	2,842,000
Variable costs:
Direct materials	24		240,000	288,000	336,000
Direct labor	43		430,000	516,000	602,000
Production supplies	27		270,000	324,000	378,000
Sales commissions	8		80,000	96,000	112,000
Packaging	16		160,000	192,000	224,000
Total variable costs	118		1180000	1416000	1652000
Contribution margin	85		850,000	1,020,000	1,190,000
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			250,000	420,000	590,000