Question

Percy Corporation sells a unit of its product for $12.00, resulting in a contribution margin of $7.00 per unit. Fixed costs are budgeted at $50,000 per quarter for volumes up to 12,000 units and $80,000 for volumes exceeding 12,000 units. Prepare the flexible budget for the next quarter for volume level of 16,000 units, as follows:

Answer 1

Operating income = $62,000

Step-by-step explanation:

As per the data given in the question,

Budget for the next quarter for 16,000 units :

Sales revenue = $192,000 (16,000×$12)

Variable expenses = $80,000 (16,000×($12-$7))

Fixed expense = $50,000

Total expense = $130,000 ($80,000+$50,000)

Operating income = $62,000 ($192,000-$130,000)