Tempo Company's fixed budget (based on sales of 16,000 units) for the first quarter reveals the following.     Fixed Budget Sales (16,000 units × $210 per unit)           $ 3,360,000   Cost of goods sold                 Direct materials   $ 384,000           Direct labor     704,000           Production supplies     432,000           Plant manager salary     184,000       1,704,000   Gross profit             1,656,000   Selling expenses                 Sales commissions     128,000           Packaging     256,000           Advertising     100,000       484,000   Administrative expenses                 Administrative salaries     234,000           Depreciation—office equip.     204,000           Insurance     174,000           Office rent     184,000       796,000   Income from operations           $ 376,000     (1) Compute the total variable cost per unit. (2) Compute the total fixed costs. (3) Compute the income from operations for sales volume of 14,000 units. (4) Compute the income from operations for sales volume of 18,000 units.

Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
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Chapter8: Budgeting
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Exercise 08-3 Preparing flexible budgets LO P1

Tempo Company's fixed budget (based on sales of 16,000 units) for the first quarter reveals the following.
 

  Fixed Budget
Sales (16,000 units × $210 per unit)           $ 3,360,000  
Cost of goods sold                
Direct materials   $ 384,000          
Direct labor     704,000          
Production supplies     432,000          
Plant manager salary     184,000       1,704,000  
Gross profit             1,656,000  
Selling expenses                
Sales commissions     128,000          
Packaging     256,000          
Advertising     100,000       484,000  
Administrative expenses                
Administrative salaries     234,000          
Depreciation—office equip.     204,000          
Insurance     174,000          
Office rent     184,000       796,000  
Income from operations           $ 376,000  
 


(1) Compute the total variable cost per unit.
(2) Compute the total fixed costs.
(3) Compute the income from operations for sales volume of 14,000 units.
(4) Compute the income from operations for sales volume of 18,000 units.
 

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