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)						$	3,066,000
Cost of goods sold
Direct materials		$	350,000
Direct labor			616,000
Production supplies			392,000
Plant manager salary			150,000				1,508,000
Gross profit							1,558,000
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						$	462,000	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:

Answer 1

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
Sales	$219		$2,628,000	$3,066,000	$3,504,000
Variable costs:
Direct materials	$25		$300,000	$350,000	$400,000
Direct labor	$44		$528,000	$616,000	$704,000
Production supplies	$28		$336,000	$392,000	$448,000
Sales commissions	$8		$96,000	$112,000	$128,000
Packaging	$16		$192,000	$224,000	$256,000
Total variable costs	$121		1452000	1694000	1936000
Contribution margin	$98.00		1,176,000	1,372,000	1,568,000
Fixed costs:
Plant manager salary		150,000	150,000	150,000	150,000
Advertising		100,000	100,000	100,000	100,000
Administrative salaries		200,000	200,000	200,000	200,000
Depreciation—office equip.		170,000	170,000	170,000	170,000
Insurance		140,000	140,000	140,000	140,000
Office rent		150,000	150,000	150,000	150,000
Total fixed costs		910,000	910,000	910,000	910,000
Income from operations			$266,000	$462,000	$658,000