Question

Tempo Company's fixed budget (based on sales of 7,000 units) for the first quarter of calendar year 2015 reveals the following.

Fixed Budget $2,800,000 $280,000 490,000 175,000 65,000 1,010,000 1.790,000 Sales (7,000 units) Cost of goods sold Direct materials Direct labor.......... Production supplies .......... Plant manager salary .......... Gross profit ................. Selling expenses Sales commissions ... Packaging ................. Advertising ............... . Administrative expenses Administrative salaries ........ Depreciation office equip. ....... Insurance ........... Office rent .................. Income from operations ......... 140,000 154,000 125,000 419.000 85,000 35,000 20,000 36,000 176,000 $1,195,000

Prepare flexible budgets following the format of Exhibit 23.3 that show variable costs per unit, fixed costs, and three different flexible budgets for sales volumes of 6,000, 7,000, and 8,000 units.

Answer 1

TEMPO COMPANY Fixed Budget Report For year Ended December 31, 2015 Flexible Budget Flexible Budget For Variable Amount per unit Units sales of 6000 Units sales of 7000 Unit sales of 8000 Total Fixed Costs Sales Variable costs Direct materials Direct labor Production supplies Sales Commissions Packaging 400 2400000 2800000 3200000 240000 280000 40 320000 420000 70 490000 560000 200000 25 150000 175000 140000 20 120000 160000 22 132000 154000 176000 Total Variable costs Contribution margin Fixed costs: Plant management salary Advertising Administrative Salaries Depreciation office equipment Insurance Office rent 177 1062000 1239000 1416000 1784000 223 1338000 1561000 65000 65000 65000 65000 125000 125000 125000 125000 85000 85000 85000 85000 35000 35000 35000 35000 20000 20000 20000 20000 36000 36000 36000 36000 Total Fixed costs 366000 366000 366000 366000 Income from oprations 972000 1195000 1418000