Tempo Company's fixed budget (based on sales of 7,000 units) for the first quarter reveals the following. Fixed BudgetSales (7,000 units × $400 per unit) $2,800,000 Cost of goods sold Direct materials $280,000 Direct labor 490,000 Production supplies 175,000 Plant manager salary 65,000 1,010,000 Gross profit 1,790,000 Selling expenses Sales commissions 140,000 Packaging 154,000 Advertising 125,000 419,000 Administrative expenses Administrative salaries 85,000 Depreciation—office equip. 35,000 Insurance 20,000 Office rent 36,000 176,000 Income from operations $1,195,000 (1) Compute the total variable cost per unit.(2) Compute the total fixed costs.(3) Compute the income from operations for sales volume of 6,000 units.(4) Compute the income from operations for sales volume of 8,000 units.

total budgeted units=7000 Income= sales volume*(revenue per unit-VC p.u.)-total fixed cost

Answered: empo Company's fixed budget (based on…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter4: Financial Planning And Forecasting

Section: Chapter Questions

Problem 5P

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Tempo Company's fixed budget (based on sales of 7,000 units) for the first quarter reveals the following.

	Fixed Budget
Sales (7,000 units × $400 per unit)				$	2,800,000
Cost of goods sold
Direct materials		$	280,000
Direct labor			490,000
Production supplies			175,000
Plant manager salary			65,000		1,010,000
Gross profit					1,790,000
Selling expenses
Sales commissions			140,000
Packaging			154,000
Advertising			125,000		419,000
Administrative expenses
Administrative salaries			85,000
Depreciation—office equip.			35,000
Insurance			20,000
Office rent			36,000		176,000
Income from operations				$	1,195,000

(1) Compute the total variable cost per unit.
(2) Compute the total fixed costs.
(3) Compute the income from operations for sales volume of 6,000 units.
(4) Compute the income from operations for sales volume of 8,000 units.

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