Question

Ibis Paper Company prepared the following static budget for​ November: Static Budget ​Units/Volume 11 comma 000 Per Unit Sales Revenue $ 20.00 $ 220 comma 000 Variable Costs 6.00 66 comma 000 Contribution Margin 154 comma 000 Fixed Costs 13 comma 500 Operating​ Income/(Loss) $ 140 comma 500 If a flexible budget is prepared at a volume of 13 comma 600 ​units, calculate the operating income. The production level is within the relevant range.

Answer 1

If a flexible budget is prepared at a volume of 13 comma 600 ​units, Operating​ Income (gain) $176,900

Step-by-step explanation:

The production level is within the relevant range. If a flexible budget is prepared at a volume of 13 comma 600 ​units, Fixed Costs will not change.

Total Sales = Sales per unit x 13,600 = $20.00 x 13,600 = $272,000

Total Variable costs = $6.00 x 13,600 = $81,600

Operating​ Income = Total Sales - Total Variable costs - Fixed Costs = $272,000 - $81,600 - $13,500 = $176,900