Question

The following static budget is provided: Units 27,000 Units Sales $ 270,000 Less variable costs: Manufacturing costs $ 94,500 Selling and administrative costs $ 56,700 Contribution margin $ 118,800 Less fixed costs: Manufacturing costs $ 29,700 Selling and administrative costs $ 17,550 Net income $ 71,550 What will budgeted net income equal if 25,000 units are produced and sold? (Do not round intermediate calculations.)

Answer 1

Net income 62,750

Step-by-step explanation:

We solve for the contribution margin per unit. Then, we multiply this by the proposed level of activity and subtract the fixed cost:

contribution margin 118,800

units sales 27,000

contribution per unit: 4.40

If 25,000 units are produced:

contribution margin 25,000 x 4.40 = 110,000

fixed cost:

manufacturing cost 29,700

S&A cost 17,550

total fixed 47,250

Net income 62,750

Answer 2

$62,750

Step-by-step explanation:

The computation of budgeted net income is shown below:-

Budgeted income = (Contribution Margin × Units produced and sold ÷ Units) - Manufacturing costs - Selling and administrative costs

= ($118,800 × 25,000 ÷ 27,000) - $29,700 - $17,550

= $110,000 - $29,700 - $17,550

= $62,750

Therefore for computing the Budgeted income we simply applied the above formula.