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Income of $190,000

New Fixed Costs: $720,000
New Selling Price: $0.40
New Variable Cost: $0.27
New Units Sold: 7,000,000

[Units sold x (Selling Price - Variable Costs)] - Fixed Costs = Operating Income

[7,000,000 x ($0.40 - $0.27)] - $720,000 = $190,000

User Tom Auger
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1 Answer

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Final Answer:

The operating income, calculated using the given formula, is $190,000.

Step-by-step explanation:

The operating income is determined by the formula:
\[ \text{Operating Income} = (Q * (SP - VC)) - FC \]

Where:

- Q is the quantity of units sold,

- SP is the selling price per unit,

- VC is the variable cost per unit, and

- FC is the fixed cost.

Given the information:

-
\( Q = 7,000,000 \)units,

-
\( SP = $0.40 \) per unit,

-
\( VC = $0.27 \) per unit, and

-
\( FC = $720,000 \).

Substituting these values into the formula, we get:


\[ \text{Operating Income} = (7,000,000 * ($0.40 - $0.27)) - $720,000 \]

Solving the expression within the parentheses:


\[ = (7,000,000 * $0.13) - $720,000 \]

Multiplying and subtracting further:


\[ = $910,000 - $720,000 \]

Finally:


\[ = $190,000 \]

Thus, the operating income is $190,000. This means that after considering the new fixed costs, selling price, variable costs, and units sold, the business is left with an operating income of $190,000. This figure is crucial for assessing the financial health and profitability of the business in light of the changes made.

User Isochronous
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