Question

1.

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

	Fixed Budget
Sales (12,000 units × $211 per unit)						$	2,532,000
Cost of goods sold
Direct materials		$	276,000
Direct labor			528,000
Production supplies			324,000
Plant manager salary			76,000				1,204,000
Gross profit							1,328,000
Selling expenses
Sales commissions			96,000
Packaging			192,000
Advertising			100,000				388,000
Administrative expenses
Administrative salaries			126,000
Depreciation—office equip.			96,000
Insurance			66,000
Office rent			76,000				364,000
Income from operations						$	576,000

(1) Compute the total variable cost per unit.
(2) Compute the total fixed costs.
(3) Compute the income from operations for sales volume of 10,000 units.
(4) Compute the income from operations for sales volume of 14,000 units.

	Variable cost per unit.

	Total fixed costs.

Income from operations at sales of 10,000 units:

	Income from operations at sales of 14,000 units.

Answer 1

TEMPO COMPANY
Flexible Budgets
For the 1st Quarter
	Flexible Budgets	Flexible Budgets
	Variable amount per unit	Total Fixed cost	10,000 units	14,000 units
Sales	$211.00		$21,10,000.00	$29,54,000.00
Variable Costs:
Direct materials	$23.00		$2,30,000.00	$3,22,000.00
Direct labor	$44.00		$4,40,000.00	$6,16,000.00
Production supplies	$27.00		$2,70,000.00	$3,78,000.00
Sales commissions	$8.00		$80,000.00	$1,12,000.00
Packaging	$16.00		$1,60,000.00	$2,24,000.00
Total Variable costs	$118.00		$11,80,000.00	$16,52,000.00
Contribution margin	$93.00		$9,30,000.00	$13,02,000.00
Fixed Costs:
Plant manager salary		$76,000	$76,000	$76,000
Advertising		$1,00,000	$1,00,000	$1,00,000
Administrative salaries		$1,26,000	$1,26,000	$1,26,000
Depreciation expnses-Office equip		$96,000	$96,000	$96,000
Insurance		$66,000	$66,000	$66,000
Office Rent		$76,000	$76,000	$76,000
Total Fixed Costs		$5,40,000	$5,40,000	$5,40,000
Income from operations			$3,90,000	$7,62,000