Question

A company's flexible budget for 60,000 units of production showed sales of $96,000, variable costs of $36,000, and fixed costs of $26,000. What operating income would be expected if the company produces and sells 70,000 units? Use a contribution margin format. You must show how you calculated each number for credit. Use the template below for all of the remaining problems. Check: Operating income should be greater than $43,000. (3 points)Sales $Variable costs $Contribution margin $Fixed costs $Operating income $

Answer 1

Calculation of Operating Income if company produces and sells 70,000 units

Sales ($96,000/60,000 units × 70,000) $112,000

Less variable costs ( $36,000/60,000×70,000) ($42,000)

Contribution $70,000

Less Period Costs

fixed costs (26,000)

Operating Income 44,000

Step-by-step explanation:

First Determine the Standard Cost or Revenue

Then Flex the Budget to the new level of 70,000 units produced and sold