Question

Clay Earth Company sells ceramic pottery at a wholesale price of $ 5.00 per unit. The variable cost of manufacture is $ 1.25 per unit. The fixed costs are $ 6 comma 700 per month. It sold 4 comma 200 units during this month. Calculate Clay​ Earth's operating income​ (loss) for this month. A. $ 9 comma 050 B. $ 14 comma 300 C. ​($ 6 comma 700​) D. ​($ 9 comma 050​)

Answer 1

A. $ 9 comma 050

Step-by-step explanation:

The operating income(loss) of a business is the result of the sales less operating costs. The operating cost is made up of the fixed cost and the variable cost.

If the Sales is more than the operating cost, the business makes an income otherwise, a loss.

Sales = $5 * 4200

= $21,000

Operating cost = $1.25 * 4200 + $6,700

= $11,950

Operating income(loss) = $21,000 - $11,950

= $9,050