Question

Terry's Appliances manufactures and sells parts for the new washer. The parts for the new washers sell for $60, and the variable operating costs per unit are $10. The managerial accountant reported fixed costs of $12,000 per month, which produces a sales volume of 14,000 parts. The manager needs to sell 20,000 parts to meet the sales quota and incur no more than $50,000 of fixed costs.

The flexible budget, with a sales volume of 32,000 parts, would show operating income of:________

Answer 1

Answer:

$1,550,000

Explanation:

Flexible budget is a type of budget that varies as as the volume or activity  changes.

In calculating flexible budget , the variable cost is multiplied by the actual production unit. However , the operating income needs to accommodate all operating expenses including the fixed cost

Sales volume = 32,000 parts

sales price per unit = $60

Variable operating cost per unit = $10

Applicable fixed cost = $50,000

Sales revenue = 32000* 60 =$1,920,000

Variable operating cost = 10 * 320,000=($3,200,000)

fixed cost = ($50,000)

Operating income = $1550,000