Question

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

	Fixed Budget
Sales (18,000 units × $204 per unit)						$	3,672,000
Cost of goods sold
Direct materials		$	450,000
Direct labor			792,000
Production supplies			504,000
Plant manager salary			250,000				1,996,000
Gross profit							1,676,000
Selling expenses
Sales commissions			126,000
Packaging			252,000
Advertising			100,000				478,000
Administrative expenses
Administrative salaries			300,000
Depreciation—office equip.			270,000
Insurance			240,000
Office rent			250,000				1,060,000
Income from operations						$	138,000

(1) Compute the total variable cost per unit.
(2) Compute the total fixed costs.
(3) Compute the income from operations for sales volume of 16,000 units.
(4) Compute the income from operations for sales volume of 20,000 units.

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(1) Variable cost per unit??

(2)Total Fixed Cost???

(3) income from operations for sales volume of 16,000 units.???

(4) income from operations for sales volume of 20,000 units.???

Answer 1

	Variable Amount per Unit	Total Fixed Cost	16,000 units	20,000 units
Sales	204		3,264,000	4,080,000
Variable costs:
Direct materials	25		400,000	500,000
Direct labor	44		704,000	880,000
Production supplies	28		448,000	560,000
Sales commissions	7		112,000	140,000
Packaging	14		224,000	280,000
Total variable costs	118		1,888,000	2,360,000
Contribution margin	86		1,376,000	1,720,000
Fixed costs:
Plant manager salary		250,000	250,000	250,000
Advertising		100,000	100,000	100,000
Administrative salaries		300,000	300,000	300,000
Depreciation—office equip.		270,000	270,000	270,000
Insurance		240,000	240,000	240,000
Office rent		250,000	250,000	250,000
Total fixed costs		1,410,000	1,410,000	1,410,000
Income from operations			-34,000	310,000
(1) Variable cost per unit	118
(2) Total Fixed Cost	1410000
(3) Income from operations for sales volume of 16,000 units.	-34,000
(4) Income from operations for sales volume of 20,000 units.	310,000