Question

Exercise 8-2 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. Fixed Budget $3,834,000 $450,000 792,000 486,000 250,000 1,978,000 1,856,000 Sales (18,000 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 162,000 270,000 100,000 532,000 300,000 270,000 240,000 250,000 1,060,000 $ 264,000 Complete the following flexible budgets for sales volumes of 16,000, 18,000, and 20,000 units. (Round cost per unit to 2 decimal places.)

Answer 1

Ans:

	Variable cost per unit	Calculation	Total fixed cost	16000 units	Calculation	18000 units	Calculation	20000 units	Calculation
Sales	213			3408000		3834000		4260000
Variable cost
Direct material	25	450000/18000		400000	25*16000	450000	25*18000	500000	25*20000
Direct labour	44	792000/18000		704000	44*16000	792000	44*18000	880000	44*20000
Production supplies	27	486000/18000		432000	27*16000	486000	27*18000	540000	27*20000
Sales commission	9	162000/18000		144000	9*16000	162000	9*18000	180000	9*20000
Packaging	15	270000/18000		240000	15*16000	270000	15*18000	300000	15*20000
Total variable cost	120	25+44+27+9+15		1920000		2160000		2400000
Contribution margin	93	213-120		1488000		1674000		1860000
Fixed cost
Plant manager salary			250000	250000		250000		250000
Advertising			100000	100000		100000		100000
Administrative salaries			300000	300000		300000		300000
Depreciation - office equipment			270000	270000		270000		270000
Insurance			240000	240000		240000		240000
Office rent			250000	250000		250000		250000
Total fixed cost			1410000	1410000		1410000		1410000
Income from operations				78000		264000		450000