Question

Ivanhoe's sells two products, a pepper relish with a selling price of $4.20 and a variable cost per jar of $1.90 and a blackberry marmalade with a selling price of $4.20 and a variable cost per jar of $1.80. Ivanhoe's expected sales are 1320 jars of pepper relish and 1980 jars of blackberry marmalade. Fixed expenses are $11236. At the expected sales level, Ivanhoe's net income will be

a.$6138
b.$0
c.$3448
d.$13860

Answer 1

To calculate Ivanhoe's net income, we need to calculate the total revenue and total cost at the expected sales level. The net income is ($5544 + $8316) - ($2508 + $3564) - $11236 = $6138.

Step-by-step explanation:

To calculate the net income of Ivanhoe's, we need to calculate the total revenue and total cost at the expected sales level. The total revenue is the product of the selling price and the number of jars sold for each product. For pepper relish, the total revenue is $4.20 * 1320 = $5544. For blackberry marmalade, the total revenue is $4.20 * 1980 = $8316. The total cost is the product of the variable cost per jar and the number of jars sold for each product. For pepper relish, the total cost is $1.90 * 1320 = $2508. For blackberry marmalade, the total cost is $1.80 * 1980 = $3564.

The net income is calculated by subtracting the total cost from the total revenue and then subtracting the fixed expenses. For Ivanhoe's, the net income is ($5544 + $8316) - ($2508 + $3564) - $11236 = $6138. Therefore, the correct answer is a. $6138.