Question

Tempo Company's fixed budget (based on sales of 16,000 units) for the first quarter of calendar year 2017 reveals the following.

	Fixed Budget
Sales (16,000 units)						$	3,408,000
Cost of goods sold
Direct materials		$	384,000
Direct labor			688,000
Production supplies			432,000
Plant manager salary			184,000				1,688,000
Gross profit							1,720,000
Selling expenses
Sales commissions			128,000
Packaging			240,000
Advertising			100,000				468,000
Administrative expenses
Administrative salaries			234,000
Depreciation—office equip.			204,000
Insurance			174,000
Office rent			184,000				796,000
Income from operations						$	456,000

Complete the following flexible budgets for sales volumes of 14,000, 16,000, and 18,000 units. (Round cost per unit to 2 decimal places.)

Answer 1

			Flexible Budget
			variable	total	14,000	16,000	18,000
			amount	fixed cost	units	units	units
			per unit
Sales			213		2982000	3408000	3834000
Variable costs:
Direct materials			24		336000	384000	432000
direct labor			43		602000	688000	774000
production supplies			27		378000	432000	486000
Sales commissions			8		112000	128000	144000
packaging			15		210000	240000	270000
total variable costs			117		1638000	1872000	2106000
contribution margin			96		1344000	1536000	1728000
Fixed costs :
plant manager salary				184,000	184,000	184,000	184,000
Advertising				100,000	100,000	100,000	100,000
Administrative salaries				234,000	234,000	234,000	234,000
Depreciation -office Equip				204,000	204,000	204,000	204,000
insurance				174,000	174,000	174,000	174,000
office rent				184,000	184,000	184,000	184,000
total fixed costs				1,080,000	1,080,000	1,080,000	1,080,000
income from operations					264,000	456,000	648,000