Question

Davis Corporation manufactures and sells portable radios. The radio sells for​ $60 per unit and its variable costs per unit are​ $20. Fixed costs are​ $52,000 per month for sales volumes up to​ 30,000 radios. If more than​ 30,000 radios are​ sold, the fixed costs will be​ $40,000. The flexible budget would reflect what monthly operating income for a sales volume of​ 37,000 radios?

Answer 1

$1,440,000

Step-by-step explanation:

sales volume =​ 37,000 radios

Selling price per unit = $60

Variable costs per unit = $20

Fixed costs = $40,000

Monthly operating income

= Sales revenue - Variable costs - Fixed costs

= ($60 × 37,000) - ($20 × 37,000) - $40,000

= $2,220,000 - $740,000 - $40,000

= $1,440,000

Therefore, the flexible budget would reflect $1,440,000 as a monthly operating income for a sales volume of​ 37,000 radios.