Question

Tempo Companys fixed budget (based on sales of 7,000 units) for the first quarter reveals the following. Fixed Budget $2,800Compute the total fixed costs. Total fixed costsCompute the income from operations for sales volume of 6,000 units. Income from operations at sales of 6,000 unitsCompute the income from operations for sales volume of 8,000 units. Income from operations at sales of 8,000 units

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Answer #1
Ans. 1 Variable cost per unit = Particular variable cost / Units sold
Direct materials $280,000 / 7,000 $40.00 per unit
Direct labor $490,000 / 7,000 $70.00 per unit
Production supplies $175,000 / 7,000 $25.00 per unit
Sales commissions $140,000 / 7,000 $20.00 per unit
Packaging $154,000 / 7,000 $22.00 per unit
Total variable cost per unit $177.00 per unit
Ans. 2 Fixed costs:
Plant manager salary $65,000
Advertising $125,000
Administrative salaries $85,000
Depreciation - Office equipment $35,000
Insurance $20,000
Office rent $36,000
Total fixed cost $366,000
Ans. 3
Particulars Amount
Sales (6,000 *$400) $2,400,000
Less: Variable expenses (6,000 * $177) $1,062,000
Contribution margin $1,338,000
Less: Fixed expenses $366,000
Income from operations $972,000
Ans. 4 Particulars Amount
Sales (8,000 *$400) $3,200,000
Less: Variable expenses (8,000 * $177) $1,416,000
Contribution margin $1,784,000
Less: Fixed expenses $366,000
Income from operations $1,418,000
*Sales = Selling price * Sales units
*Variable expenses = Variable cost per unit * Sales units
*Fixed expenses remain constant on each level of sales.
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