Question

Tempo Company's fixed budget (based on sales of 14,000 units) for the first quarter of calendar year 2017 reveals the following.

	Fixed Budget
Sales (14,000 units)						$	2,954,000
Cost of goods sold
Direct materials		$	350,000
Direct labor			588,000
Production supplies			378,000
Plant manager salary			150,000				1,466,000
Gross profit							1,488,000
Selling expenses
Sales commissions			112,000
Packaging			224,000
Advertising			100,000				436,000
Administrative expenses
Administrative salaries			200,000
Depreciation—office equip.			170,000
Insurance			140,000
Office rent			150,000				660,000
Income from operations						$	392,00

Complete the following flexible budgets for sales volumes of 12,000, 14,000, and 16,000 units. (Round cost per unit to 2 decimal places.)

	TEMPO COMPANY Flexible Budgets For Quarter Ended March 31, 2017 ------Flexible Budget------ ------Flexible Budget at ------ Variable Amount per Unit Total Fixed Cost 12,000 units 14,000 units 16,000 units ? ? ? ? Variable costs: ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Fixed costs: ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?

Note: Please solve the problem completely.

Answer 1

Ans.	TEMPO COMPANY
	Flexible Budgets
	For Quarter Ended March 31, 2017
		Flexible budget		Flexible budget in units
		Variable amount per unit	Total fixed cost	12000	14000	16000
	Sales	211		2532000	2954000	3376000
	Variable costs
	Direct materials	25		300000	350000	400000
	Direct labor	42		504000	588000	672000
	Production supplies	27		324000	378000	432000
	Sales commissions	8		96000	112000	128000
	Packaging	16		192000	224000	256000
	Total variable costs	118		1416000	1652000	1888000
	Contribution margin	93		1116000	1302000	1488000
	Fixed costs:
	Plant manager salary		150000	150000	150000	150000
	Advertising		100000	100000	100000	100000
	Administrative salaries		200000	200000	200000	200000
	Depreciation-office equipment		170000	170000	170000	170000
	Insurance		140000	140000	140000	140000
	Office rent		150000	150000	150000	150000
	Total fixed costs		910000	910000	910000	910000
	Income from operations			206000	392000	578000
	*Calculation of variable amount per unit:
	Variable amount per unit = Total of amount / No. of units sold
	Sales	2954000/14000	211
	Variable costs
	Direct materials	350000/14000	25
	Direct labor	588000/14000	42
	Production supplies	378000/14000	27
	Sales commissions	112000/14000	8
	Packaging	224000/14000	16
	*All salaries, depreciation, rent and insurance are fixed costs, and remaining are variable. *Fixed costs does not change by the change in volume.