Question

A company's flexible budget for 14,000 units of production showed total contribution margin of $42,000 and fixed costs, $40,000. The operating income expected if the company produces and sells 26,000 units is:

Answer 1

$2,000 is the expected operating income.

Explanation:

Given:

The company's flexible budget = 14000 units.

Total contribution margin = $42,000.

Fixed costs = $40,000.

The company produces and sells 26,000 units.

Now, to find the operating income expected:

So, to get the operating income we deduct the fixed costs from the total contribution margin:

`Total\ contribution\ margin-Fixed\ costs\\\\=\$42,000-\$40,000\\\\=\$2,000.`

Therefore, $2,000 is the expected operating income.