Question

Tempo Company's fixed budget (based on sales of 10,000 units) for the first quarter reveals the following Fixed Budget $2,050,e00 Sales (10,000 units x $205 per unit) Cost of goods sold Direct materials $240,000 Direct labor 440,000 Production supplies Plant manager salary Gross profit Selling expenses Sales commissions Packaging Advertising Administrative expenses Administrative salaries Depreciation-office equip. Insurance Office rent 260,000 40,000 980,000 1,070,000 80,000 150,000 100,000 330,000 90,000 60,000 30,000 40,000 220,000 $ 520,000 Income from operations (1) Compute the total variable cost per unit (2) Compute the total fixed costs. (3) Compute the income from operations for sales volume of 8,000 units. (4) Compute the income from operations for sales volume of 12.000 units

Answer 1

	Variable Amount per Unit	Total Fixed Cost
Sales	205
Variable costs:
Direct materials	24
Direct labor	44
Production supplies	26
Sales commissions	8
Packaging	15
Total variable costs	117
Contribution margin	88
Fixed costs:
Plant manager salary		40,000
Advertising		100,000
Administrative salaries		90,000
Depreciation—office equip.		60,000
Insurance		30,000
Office rent		40,000
Total fixed costs		360,000
1
Variable cost per unit	117
2
Total fixed costs	360000
3
Income from operations at sales of 8000 units	344000	=(8000*88)-360000
4
Income from operations at sales of 12000 units	696000	=(12000*88)-360000