Question

Tempo Company's fixed budget (based on sales of 14,000 units) for the first quarter reveals the following. Fixed Budget $2,996,000 $322,000 602,000 392,000 122,000 1,438,000 1,558,000 Sales (14,000 units * $214 per unit) 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 112,000 210,000 100,000 422,000 172,000 142,000 112,000 122,000 548,000 588,000 6 (1) Compute the total variable cost per unit. (2) Compute the total fixed costs. (3) Compute the income from operations for sales volume of 12,000 units. (4) Compute the income from operations for sales volume of 16,000 units.

Answer 1

Value in $
Particuars		Cost Per unit	14000 units (given)	12000 Units	16000 units
Sales		214	2,996,000	2,568,000	3,424,000
Less: Total Variable Costs
Direct materials	23		322,000	276,000	368,000
Direct labor	43		602,000	516,000	688,000
Production supplies	28		392,000	336,000	448,000
Sales commissions	8		112,000	96,000	128,000
Packaging	15	117	210,000	180,000	240,000
Contribution    (A)		97	1,358,000	1,164,000	1,552,000
Total Fixed Costs
Plant manager salary			122,000	122,000	122,000
Advertising			100,000	100,000	100,000
Administrative salaries			172,000	172,000	172,000
Depreciation- Office. Equipments			142,000	142,000	142,000
Insurance			112,000	112,000	112,000
Office rent			122,000	122,000	122,000
Total Fixed Costs (B)			770,000	770,000	770,000
Income from Operations (A)- (B)			588,000	394,000	782,000

Answers.
1. Total variable cost per unit		$117/unit
2.Total fixed costs		$77,000
3. Income from operations for sales volume of 12000units		$394,000
4. Income from operations for sales volume of 16000units		$782,000