Question

International Data Systems' information on revenue and costs is relevant only up to a sales volume of 115,000 units. After 115,000 units, the market becomes saturated and the price per unit falls from $16.00 to $9.80. Also, there are cost overruns at a production volume of over 115,000 units, and variable cost per unit goes up from $8.00 to $8.25. Fixed costs remain the same at $65,000. a. Compute operating income at 115,000 units.

Answer 1

$855,000

Step-by-step explanation:

The computation of the operating income is shown below:

Operating income at 115,000 units is

= (Selling price per unit - variable cost per unit) × sales volume - fixed cost

= ($16 - $8) × 115,000 - 65,000

= $855,000

Hence, the operating income at 115,000 units is $855,000

All other things are irrelevant. Hence, ignored it