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 × $218 per unit)						$	3,052,000
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							1,600,000
Selling expenses
Sales commissions			112,000
Packaging			210,000
Advertising			100,000				422,000
Administrative expenses
Administrative salaries			186,000
Depreciation—office equip.			156,000
Insurance			126,000
Office rent			136,000				604,000
Income from operations						$	574,000

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

Answer: Total variable cost per unit Total Fixed Cost Income from operation at 12000 units Income from operation at 16000 units 117 840000 372000 776000

ТЕMPO COMPANY Fixed Budget Report For year Ended December 31, 2017 Flexible Budget Flexible Budget at Variable Amount per unit Units sales of 12000 Total Fixed Costs Units sales of 14000 Unit sales of 16000 Sales 2616000 218.00 3052000 3488000 Variable costs: Direct materials Direct labor Production supplies Sales Commissions Packaging 24.00 288000 336000 384000 43.00 516000 602000 688000 27.00 324000 378000 432000 8.00 96000 112000 128000 15.00 180000 210000 240000 Total Variable costs Contribution margin 1404000 117.00 1638000 1872000 101.00 1212000 1616000 1414000 Fixed costs: Plant management salary Advertising Administrative Salaries Depreciation office equipment 136000 136000 136000 136000 100000 100000 100000 100000 186000 186000 186000 186000 156000 156000 156000 156000 126000 Insurance 126000 126000 126000 office rent 136000 136000 136000 136000 Total Fixed costs Income from operations 840000 840000 840000 840000 776000 372000 574000