Question

Based on a predicted level of production and sales of 30,000 units, a company anticipates total contribution margin of $105,000, fixed costs of $40,000, and operating income of $65,000. Based on this information, the budgeted operating income for 28,000 units would be:______________. A) $52,000. B) $135,333. C) $58,000. D) $72,500. E) $105,000.

Answer 1

Answer:

The correct answer is C

Explanation:

Computing the unit contribution margin as:

Unit contribution margin = Total Contribution margin / Units of sales

= $105,000 / 30,000

= $3.50

The budgeted operating income for the 28,000 units is computed as:

Budgeted operating income =( Number of units × Unit contribution margin) - Fixed Cost

= (28,000 × $3.50) - $40,000

= $98,000 - $40,000

= $58,000