Question

Brodrick Company expects to produce 21,600 units for the year ending December 31. A flexible budget for 21,600 units of production reflects sales of $496,800; variable costs of $64,800; and fixed costs of $140,000. QS 23-3 Flexible budget LO P1 If the company instead expects to produce and sell 26,300 units for the year, calculate the expected level of income from operations.

Answer 1

Brodrick Company

If the company instead expects to produce and sell 26,300 units for the year, the expected level of income from operations is:

= $386,000.

Step-by-step explanation:

a) Data and Calculations:

Expected production for the year ending December 31 = 21,600 units

Sales based on 21,600 units = $496,800 ($23 per unit)

Variable costs on 21,600 units 64,800 ($3 per unit)

Contribution margin = $432,000 ($20 per unit

Fixed costs = 140,000

Net operating income = $292,000

Expected level of income from operations (26,300 units):

Sales revenue (26,300 * $23) = $604,900

Variable costs (26,300 * $3) = 78,900

Contribution margin $526,000

Fixed costs = 140,000

Net operating income = $386,000