Question

A company's flexible budget for 13,200 units of production showed sales, $54,120; variable costs, $21,120; and fixed costs, $18,000. The operating income expected if the company produces and sells 19,600 units is:

Answer 1

Answer:

Net income= $31,000

Explanation:

Giving the following information:

Production= 13,200

Sales= 54,120

Variable costs= $21,120

Fixed costs= $18,000

First, we need to calculate the unitary contribution margin:

Unitary contribution margin= total contribution margin/number of units

Unitary contribution margin= (54,120 - 21,120) / 13,200

Unitary contribution margin= $2.5

Now, for 19,600 units:

Total contribution margin= 2.5*19,600= 49,000

Fixed costs= (18,000)

Net income= 31,000