Question

# Tempo Company's fixed budget (based on sales of 12,000 units) for the first quarter reveals the...

Tempo Company's fixed budget (based on sales of 12,000 units) for the first quarter reveals the following.

 Fixed Budget Sales (12,000 units × \$203 per unit) \$ 2,436,000 Cost of goods sold Direct materials \$ 300,000 Direct labor 504,000 Production supplies 324,000 Plant manager salary 100,000 1,228,000 Gross profit 1,208,000 Selling expenses Sales commissions 108,000 Packaging 180,000 Advertising 100,000 388,000 Administrative expenses Administrative salaries 150,000 Depreciation—office equip. 120,000 Insurance 90,000 Office rent 100,000 460,000 Income from operations \$ 360,000

(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.

 Sales price per unit 203 Variable costs per unit: Direct materials 25 =300000/12000 Direct labor 42 =504000/12000 Production supplies 27 =324000/12000 Sales commissions 9 =108000/12000 Packaging 15 =180000/12000 Total variable costs per unit 118 Contribution margin per unit 85 Fixed costs: Plant manager salary 100000 Advertising 100000 Administrative salaries 150000 Depreciation—office equip. 120000 Insurance 90000 Office rent 100000 Total fixed costs 660000 1 Total variable cost per unit 118 2 Total fixed costs 660000 3 Income from operations at 10,000 units 190000 =(10000*85)-660000 4 Income from operations at 14,000 units 530000 =(14000*85)-660000

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