Question

Cargo corporation sells its cargo carriers for​ $700 each. its variable cost is​ $400 per carrier. fixed costs are​ $31,000 per month for volumes up to​ 1,100 carriers. above​ 1,100 carriers, monthly fixed costs are​ $54,000. what is the budgeted operating income at a level of​ 2,600 carriers per​ month?

a. ​$726,000
b. ​$780,000
c. ​$749,000
d. ​$1,766,000

Answer 1

The budgeted operating income for Cargo Corporation at a level of 2,600 carriers per month is $726,000, calculated by subtracting the fixed costs from the total contribution margin.

Step-by-step explanation:

To calculate the budgeted operating income for Cargo Corporation at a level of 2,600 carriers per month, we need to perform a few steps considering the variable costs, fixed costs, and the revenue generated by the sale of carriers.

For each carrier sold at $700 with variable costs being $400, the contribution margin per carrier is $300 ($700 - $400). Selling 2,600 carriers, the total contribution margin is 2,600 carriers × $300 = $780,000.

Since the volume is above 1,100 carriers, the monthly fixed costs are $54,000. To calculate the operating income, we subtract the fixed costs from the total contribution margin:

$780,000 (Total Contribution Margin) - $54,000 (Fixed Costs) = $726,000 budgeted operating income.

Therefore, the correct answer is:

a. $726,000