Question

Exercise 21-2 Preparing flexible budgets LO P1

Tempo Company's fixed budget (based on sales of 10,000 units) for the first quarter of calendar year 2017 reveals the following.

	Fixed Budget
Sales (10,000 units)						$	2,150,000
Cost of goods sold
Direct materials		$	250,000
Direct labor			420,000
Production supplies			260,000
Plant manager salary			50,000				980,000
Gross profit							1,170,000
Selling expenses
Sales commissions			70,000
Packaging			150,000
Advertising			100,000				320,000
Administrative expenses
Administrative salaries			100,000
Depreciation—office equip.			70,000
Insurance			40,000
Office rent			50,000				260,000
Income from operations						$	590,000

Complete the following flexible budgets for sales volumes of 8,000, 10,000, and 12,000 units. (Round cost per unit to 2 decimal places.)

	TEMPO COMPANY Flexible Budgets For Quarter Ended March 31, 2017 ------Flexible Budget------ ------Flexible Budget at ------ Variable Amount per Unit Total Fixed Cost 8,000 units 10,000 units 12,000 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	8,000 units	10,000 units	12,000 units
Sales	$215		$1,720,000	$2,150,000	$2,580,000
Variable costs:
Direct materials	25		$200,000	$250,000	$300,000
Direct labor	42		$336,000	$420,000	$504,000
Production supplies	26		$208,000	$260,000	$312,000
Sales commissions	7		$56,000	$70,000	$84,000
Packaging	15		$120,000	$150,000	$180,000
Total variable costs	115		920000	1150000	1380000
Contribution margin	$100		$800,000	$1,000,000	$1,200,000
Fixed costs:
Plant manager salary		50,000	50,000	50,000	50,000
Advertising		100,000	100,000	100,000	100,000
Administrative salaries		100,000	100,000	100,000	100,000
Depreciation—office equip.		70,000	70,000	70,000	70,000
Insurance		40,000	40,000	40,000	40,000
Office rent		50,000	50,000	50,000	50,000
Total fixed costs		410,000	410,000	410,000	410,000
Income from operations			$390,000	$590,000	$790,000