Question

Butler Company developed a static budget at the beginning of the company's accounting period based on an expected volume of 6,000 units: Per unit Revenue $8.00 Variable costs 2.50 Contribution margin $5.50 Fixed costs 3.00 Net income $2.50 If actual production totals 7,000 units which is within the relevant range, the flexible budget would show fixed costs of:

Answer 1

$ 18,000

Step-by-step explanation:

Given:

Revenue = $8.00 / unit

Variable costs = 2.50 / unit

Contribution margin = $5.50 / unit

Fixed costs = 3.00 / unit

Net income = $2.50 / unit

now,

the fixed cost remains same for the prescribed range and also the fixed cost does not vary with the volume if within the prescribed range,.

Thus,

fixed cost for 7,000 units will be same as the fixed cost for the 6,000 units

therefore,

Fixed cost = 3.00 × 6,000 = $ 18,000