A company\'s flexible budget for 18,000 units of production showed sales, $90,00

Question

A company's flexible budget for 18,000 units of production showed sales, $90,000; variable costs, $45,000; and fixed costs, $21,000. The operating income expected if the company produces and sells 22,000 units is (Do not round intermediate calculations):

a$8,333.

b$24,000.

c$34,000.

d$29,333.

e$60,000.

A company's flexible budget for 18,000 units of production showed sales, $90,000; variable costs, $45,000; and fixed costs, $21,000. The operating income expected if the company produces and sells 22,000 units is (Do not round intermediate calculations):

Explanation / Answer

For 18,00 units :

Sales = $90,000

Salling price per unit = 90,000/18,000 = $5

Variable Cost = $45,000

Variable Cost per unit = 45,000/18,000 = $2.5

Fixed Cost = $21,000

For 22,000 units :

Selling price = $5

Variable Cost = $2.5

Fixed Cost = $21,000

Revenue = 5*22,000 = $110,000

Variable Cost = 22,000*2.5 = $55,000

Expected Operating Income = Revenue - Variable Expenses - Fixed Cost

= 110,000 - 55,000 - 21,000 = $34,000

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