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456 Managerial Accounting, 6th Edition
Exercise 8-2 (30 minutes)
TEMPO COMPANY
Flexible Budgets
For Quarter Ended March 31, 2017
Flexible Budget Flexible Flexible Flexible
Variable
Amount
per Unit*
Total
Fixed
Cost
Budget for
Unit Sales
of 6,000
Budget for
Unit Sales
of 7,000
Budget for
Unit Sales
of 8,000
Sales ................................... $400.00 $2,400,000 $2,800,000 $3,200,000
Variable costs
Direct materials ................ 40.00 240,000 280,000 320,000
Direct labor ....................... 70.00 420,000 490,000 560,000
Production supplies ........ 25.00 150,000 175,000 200,000
Sales commissions ......... 20.00 120,000 140,000 160,000
Packaging ......................... 22.00 132,000 154,000 176,000
Total variable costs ......... 177.00 1,062,000 1,239,000 1,416,000
Contribution margin .......... $223.00 1,338,000 1,561,000 1,784,000
Fixed costs
Plant manager salary ....... $ 65,000 65,000 65,000 65,000
Advertising ....................... 125,000 125,000 125,000 125,000
Admin. salaries ................ 85,000 85,000 85,000 85,000
Depr.—Office equip. ........ 35,000 35,000 35,000 35,000
Insurance .......................... 20,000 20,000 20,000 20,000
Office rent ......................... 36,000 36,000 36,000 36,000
Total fixed costs .............. $366,000 366,000 366,000 366,000
Income from operations ....... $ 972,000 $1,195,000 $1,418,000
* Equals total variable costs divided by the volume of 7,000 units.