Question

Tempo Company's fixed budget (based on sales of 14,000 units) for the first quarter reveals the following.

	Fixed Budget
Sales (14,000 units × $213 per unit)						$	2,982,000
Cost of goods sold
Direct materials		$	336,000
Direct labor			602,000
Production supplies			378,000
Plant manager salary			136,000				1,452,000
Gross profit							1,530,000
Selling expenses
Sales commissions			98,000
Packaging			210,000
Advertising			100,000				408,000
Administrative expenses
Administrative salaries			186,000
Depreciation—office equip.			156,000
Insurance			126,000
Office rent			136,000				604,000
Income from operations						$	518,000

(1) Compute the total variable cost per unit.
(2) Compute the total fixed costs.
(3) Compute the income from operations for sales volume of 12,000 units.
(4) Compute the income from operations for sales volume of 16,000 units.

Answer 1

TEMPO COMPANY Flexible Budgets Flexible Budget Flexible Budget at Variable Amount Per Total Fixed 12000 Units 14000 Units 16000 Units Unit Costs S 2,556,000 2,982,000 S 3,408,000 $ 516,000$ $ 324,000 $ $ 84,000 $ $ 180,000 $ $ 1,392,000 $ S 1,164,000 602,000$ 378,000 $ 98,000 $ 210,000 $ 1.624,000 $ 1,358,000S 688,000 432,000 112,000 240,000 1,856,000 1,552,000 Sales Variable Costs Direct Materials Direct Labour Production Supplides Sales Commissions Packging Total Variable Costs Contribution Margin Fixed Costs Plant Manager Salary advertaising Administrative Salaries Depreciation - Office Equipment Insurance Office Rent Total Fixed Costs Income From Operations $ $ $ $ $ $ $ 136,000 $ 100,000 $ 186,000 $ 156,000 $ 126,000 $ 136,000 $ 840,000 $ S 136,000 $ 100,000 $ 186,000 $ 156,000 $ 126,000 $ 136,000 $ 840,000 $ 324,000 S 136,000 $ 100,000 $ 186,000 $ 156,000 $ 126,000 $ 136,000 $ 840,000 $ 518,000 S 136,000 100,000 186,000 156,000 126,000 136,000 840,000 712,000

1 Total Variable Cost per Unit $ 2 Total Fixed Costs $ 3 Net Operating income at 12,000 unit $ 4 Net operating Income at 16,000 unit $ 116 840,000 324,000 712,000