Question

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

Answer 1

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