Question

A company's flexible budget for 24,000 units of production showed per unit contribution margin of $2.50 and fixed costs, $31,200. The operating income expected if the company produces and sells 29,000 units is:

Answer 1

The operating income will be:

Total contribution($2.50 x 29,000) = 72,500

Less: Fixed cost = 31,200

Operating income = 41,300

Step-by-step explanation:

The contribution per unit is $2.50. This per unit contribution will be multiplied by the number of units produced and sold in order to obtain total contribution. Operating income is the excess of total contribution over fixed cost.