Question

A company's flexible budget for 10,000 units of production reflects sales of $200,000; variable costs of $40,000; and fixed costs of $75,000. Calculate the expected level of operating income if the company produces and sells 13,000 units. A) $85,000. B) $50,500. C) $133,000. D) $110,500. E) $100,000.

Answer 1

C) $133,000

Step-by-step explanation:

We have to divide the sales and the variable cost by the unit budgeted

This will be the unit sales price and unit variable cost

200,000/10,000 = 20

40,000/10,000 = 4

Next we do the income statment

Sales Revenue $20 x 13,000 = 260,000

Variable Cost $4 x 13,000= (52,000)

Contribution Margin 208,000

Fixed Cost (75,000)

Operting Income 133,000