Question

Tempo Company's fixed budget (based on sales of 12,000 units) for the first quarter reveals the following. Fixed Budget Sales (12,eee units * $214 per unit) $2,568,000 Cost of goods sold Direct materials $288,000 Direct labor 516,000 Production supplies 324,000 Plant manager salary 88,000 1, 216,000 Gross profit 1,352,000 Selling expenses Sales commissions 96,000 Packaging 192,000 Advertising 100,00 388,000 Administrative expenses Administrative salaries 138,000 Depreciation office equip. 108.000 Insurance 78,000 Office rent 88,000 412,000 Income from operations $ 552,000 (1) Compute the total variable cost per unit. (2) Compute the total fixed costs (3) Compute the income from operations for sales volume of 10,000 units (4) Compute the income from operations for sales volume of 14,000 units. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 hs Compute the total variable cost per unit. Variable cost perunt

Answer 1

Solution:

1)

Total variable cost per unit = Total variable costs/Number of units

=$1,416,000/12,000

=$118 per unit

Working:

Total variable costs = Direct material +Direct labor+ Production supplies+ Sales commissions+packaging

=$288,000+$516,000+$324,000+$96,000+$192,000

=$1,416,000.

2)

Total fixed costs = Plant manager salary+ Advertising+ Administrative salaries+ Depreciation-office equipment+ Insurance + Office rent

=88,000+$100,000+$138,000+$108,000+$78,000+$88,000

=$600,000

3)

Income from operations at 10,000 units = Sales-Variable costs-Fixed costs

= (10,000*$214 per unit) - (10,000*$118 per unit) -$600,000

=$2,100,000 -$1,180,000-$600,000

=$320,000

4)

Income from operations at 14,000 units = Sales-Variable costs-Fixed costs

= (14,000*$214 per unit) -(14,000*$118 per unit)-$600,000

=$2,940,000 -$1,652,000 -$600,000

=$688,000.

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