Question

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

	Fixed Budget
Sales (14,000 units × $212 per unit)						$	2,968,000
Cost of goods sold
Direct materials		$	350,000
Direct labor			602,000
Production supplies			392,000
Plant manager salary			150,000				1,494,000
Gross profit							1,474,000
Selling expenses
Sales commissions			112,000
Packaging			196,000
Advertising			100,000				408,000
Administrative expenses
Administrative salaries			200,000
Depreciation—office equip.			170,000
Insurance			140,000
Office rent			150,000				660,000
Income from operations						$	406,000

(1) Compute the total variable cost per unit.
(2) Compute the total fixed costs.
(3) Compute the income from operations for sales volume of 12,000 units.
(4) Compute the income from operations for sales volume of 16,000 units.

that is the exact question

Answer 1

1)

Variable Cost Per unit
Variable Costs
Direct Materials	350000
Direct Labor	602000
Production Supplies	392000
Sales Commission	112000
Packaging	196000
Total Variable Cost	1652000
Variable Cost Per unit=	Total Variable Cost /Budgeted Sales
Budgeted Sales =	14000 units
Variable Cost Per unit =	1652000/14000
	$118 / unit

2)

Total Fixed Cost
Plant Manager Salary	150000
Advertising	100000
Administrative Salary	200000
Depreciation -office equip	170000
Insurance	140000
Office Rent	150000
Total Fixed Cost	$910000

3)

Income Frome Operation (Sales volume 12000 units)
Sales (12000*212 per unit)	$ 2544000
(-) Variable Cost 118*12000	- 1416000
(-)Fixed Cost	- 910000
Income Frome Operation	218000

4)

Income Frome Operation (Sales volume 16000 units)
Sales (16000*212 per unit)	$3392000
(-) Variable Cost (118*16000)	-1888000
(-)Fixed Cost	-910000
Income Frome Operation	594000

Note : Income From operation is computed by using variable costing method. However it can be computed using Absorption costing Method also.