Question: Tempo Company’s fixed budget for the first quarter of year 2016 reveals the following. Prepare flexible budgets that show variable costs per unit, fixed costs, and three different flexible budgets for sales volumes of 6,000, 7,000, and 8,000 units.
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Sales (7,000 units)
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$2,800.000
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Cost of goods sold:
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Direct materials
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$280,000
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Direct labor
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$490,000
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Production supplies
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$175,000
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Plant manager salary
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$65,000
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Total
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$1,010,000
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Gross profit
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$1,790,000
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Selling expenses:
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Sales commission
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$140,000
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Packaging
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$154,000
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Advertising
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$125,000
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Total
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$419,000
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Administrative expenses:
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Administrative salaries
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$85,000
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Depreciation - office equipment
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$35,000
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Insurance
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$20,000
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Office rent
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$36,000
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Total
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$176,000
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Income from operations
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$1,195,000
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