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.

Homework Answers

Answer #1
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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