Question

Office Plus sells its main​ product, ergonomic mouse​ pads, for $ 12 each. Its variable cost is $ 5.30 per pad. Fixed costs are $ 215,000 per month for volumes up to​ 65,000 pads. Above​ 65,000 pads, monthly fixed costs are $ 265,000. Prepare a monthly flexible budget for the​ product, showing sales​ revenue, variable​ costs, fixed​ costs, and operating income for volume levels of 35,000​, 45,000​, and 80,000 pads.

Answer 1

Step-by-step explanation:

Based on the given information in the question, the steps for computing operating income is given below:

Step 1: First we have to calculate the contribution which is calculated by subtracting variable cost from sales.

So, Contribution = Sales - Variable cost

Step 2 : Now, after calculating contribution, the operating income is to be calculated.

Operating income = Contribution - Fixed cost.

The sales, variable cost, contribution is changed as production level is increased. But the fixed cost is remain unchanged unless not given in the question.

The computation of different volume levels which includes 35,000​, 45,000​, and 80,000 pads. is given in the attachment sheet.