18. The following static budget is provided: units 20,000 sales 200,000 less var
ID: 2461188 • Letter: 1
Question
18. The following static budget is provided:
units 20,000
sales 200,000
less variable costs:
manufacturing costs 70,000
selling and administrative costs 40,000
contribution margin 90,000
less fixed costs:
manufacturing costs 22,000
selling and administrative costs 17,000
net income 51,000
What will budgeted net income equal if 21,000 units are produced and sold? (Do not round intermediate calculations.) A. $53,550 B. $55,500 C. $94,500 D. $210,000
The answer is B. 55,500 but I do not know how to work this problem out to get that answer
Explanation / Answer
If units sold are 21000 units
The sales revenue and variable expenses will also change proportionately, however the fixed expenses will remain the same.
Sales revenue for 20000 units =$200000
Selling price per unit=200000/20000=$10 per unit
Total variable expenses for 20000 units =$110000
Variable expense per unit=1100000/20000=5.5
Variable cost for 21000 units=115500
Contribution margin=Sales-Variable cost
Fixed cost same
units 21,000
sales 210,000
less; variable costs: 115,500
contribution margin 94,500
less fixed costs:
manufacturing costs 22,000
selling and administrative costs 17,000
net income 55,500
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