Question

Tempo Company's fixed budget for the first quarter of calendar yeat 2015 reveals the following:

Sales (14,000) units		$3,038,000
Cost of Goods Sold
Direct materials	$334,600
Direct labor	607,600
Production supplies	394,800
Plant manager salary	91,000	1,428,000
Gross profit		1,610,000
Selling expenses
Sales commissions	121,800
Packaging	212,800
Advertising	85,000	419,600
Administrative expenses
Administrative salaries	182,000
Depreciation-office equipment	152,000
Insurace	97,000
Office rent	109,000	540,000
Income from operations		$650,400

Prepare flexible budgets that show variable costs per unit, fixed costs, and three different flexible budgets for sales volumes of 12,000, 14,000, and 16,000 units.

Answer 1

TEMPO COMPANY
Flexible Budgets
For Quarter Ended March 31, 2015
	------Flexible Budget------		------Flexible Budget at ------
	Variable Amount per Unit	Total Fixed Cost	12,000 units	14,000 units	16,000 units
Sales	$217		$2,604,000	$3,038,000	$3,472,000
Variable costs:
Direct materials	$24		$286,800	$334,600	$382,400
Direct labor	$43		$520,800	$607,600	$694,400
Production supplies	$28		$338,400	$394,800	$451,200
Sales commissions	$9		$104,400	$121,800	$139,200
Packaging	$15		$182,400	$212,800	$243,200
Total variable costs	$119		$1,432,800	$1,671,600	$1,910,400
Contribution margin	$97.60		$1,171,200	$1,366,400	$1,561,600
Fixed costs:
Plant manager salary		91,000	91,000	91,000	91,000
Advertising		85,000	85,000	85,000	85,000
Administrative salaries		182,000	182,000	182,000	182,000
Depreciation—office equip.		152,000	152,000	152,000	152,000
Insurance		97,000	97,000	97,000	97,000
Office rent		109,000	109,000	109,000	109,000
Total fixed costs		716,000	716,000	716,000	716,000
Income from operations			$455,200	$650,400	$845,600