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In: Accounting

Tempo Company's fixed budget (based on sales of 18,000 units) for the first quarter of calendar...

Tempo Company's fixed budget (based on sales of 18,000 units) for the first quarter of calendar year 2017 reveals the following.

Fixed Budget
Sales (18,000 units) $ 3,780,000
Cost of goods sold
Direct materials $ 432,000
Direct labor 774,000
Production supplies 504,000
Plant manager salary 232,000 1,942,000
Gross profit 1,838,000
Selling expenses
Sales commissions 126,000
Packaging 288,000
Advertising 100,000 514,000
Administrative expenses
Administrative salaries 282,000
Depreciation—office equip. 252,000
Insurance 222,000
Office rent 232,000 988,000
Income from operations $ 336,000


Complete the following flexible budgets for sales volumes of 16,000, 18,000, and 20,000 units

Solutions

Expert Solution

TEMPO COMPANY
Flexible Budgets
For Quarter Ended March 31, 2017
------Flexible Budget------ ------Flexible Budget at ------
Variable Amount per Unit Total Fixed Cost 16,000 units 18,000 units 20,000 units
Sales $210 $3,360,000 $3,780,000 $4,200,000
Variable costs:
Direct materials $24 $384,000 $432,000 $480,000
Direct labor $43 $688,000 $774,000 $860,000
Production supplies $28 $448,000 $504,000 $560,000
Sales commissions $7 $112,000 $126,000 $140,000
Packaging $16 $256,000 $288,000 $320,000
Total variable costs $118 $1,888,000 $2,124,000 $2,360,000
Contribution margin $92.00 $1,472,000 $1,656,000 $1,840,000
Fixed costs:
Plant manager salary 232,000 232,000 232,000 232,000
Advertising 100,000 100,000 100,000 100,000
Administrative salaries 282,000 282,000 282,000 282,000
Depreciation—office equip. 252,000 252,000 252,000 252,000
Insurance 222,000 222,000 222,000 222,000
Office rent 232,000 232,000 232,000 232,000
Total fixed costs 1,320,000 1,320,000 1,320,000 1,320,000
Income from operations $152,000 $336,000 $520,000

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