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Item 1

Item 1 15 points

Exercise 21-2 Preparing flexible budgets LO P1

Tempo Company's fixed budget (based on sales of 18,000 units) for the first quarter of calendar year 2017 reveals the following.

Complete the following flexible budgets for sales volumes of 16,000, 18,000, and 20,000 units.

	Fixed Budget
Sales (18,000 units)						$	3,780,000
Cost of goods sold
Direct materials		$	432,000
Direct labor			756,000
Production supplies			486,000
Plant manager salary			232,000				1,906,000
Gross profit							1,874,000
Selling expenses
Sales commissions			144,000
Packaging			270,000
Advertising			100,000				514,000
Administrative expenses
Administrative salaries			282,000
Depreciation—office equip.			252,000
Insurance			222,000
Office rent			232,000				988,000
Income from operations						$	372,000
Variable costs: Fixed costs:

Answer 1

TEMPO COMPANY Fixed Budget Report For year Ended December 31, 2017 Flexible Budget Flexible Budget at Variable Amount per unit Units sales of 16000 Units sales of 18000 Total Fixed Costs Unit sales of 20000 Sales Variable costs: Direct materials Direct labor Production supplies Sales Commissions Packaging 3360000 3780000 210.00 4200000 384000 432000 480000 24.00 672000 756000 42,00 840000 27.00 432000 486000 540000 160000 8.00 128000 144000 15.00 240000 270000 300000 Variable costs per unit Contribution margin Fixed costs: Plant management salary Advertising Administrative Salaries Depreciation office equipment 116.00 1856000 2088000 2320000 94.00 1504000 1692000 1880000 232000 232000 232000 232000 100000 100000 100000 100000 282000 282000 282000 282000 252000 252000 252000 252000 222000 Insurance 222000 222000 222000 Office rent 232000 232000 232000 232000 Total Fixed costs 1320000 1320000 1320000 1320000 Income from operations 560000 184000 372000