1 pt capachy defined in terms of X500 units that can be produced. The industhy m

Question

1 pt capachy defined in terms of X500 units that can be produced. The industhy marhat size for nppliances increased 10% fom 2017 to 2018. The falowing additional date aro available for 2017 and 21: 2017 2018 16,000 17600 $140 $133 36,000 35,000 $10 $13 12,50011,800 $350,000 $330,400 $28 $28 Units of X500 produced and sold Selling price Direct materials (equare feet capacity for X500 (units) Total Conversion costs per unit of capacity A. S,880.000 O B. $2.240,000 O c. $1,530,000 O D. $1,890,000 2 5

Explanation / Answer

Answer:

Option C i.e. $1,530,000

Operating Income for 2017 = Sales Revenue – Direct Material Cost – Manufacturing Cost

Sales Revenue = 16,000 * $140 = $2,240,000
Direct Material Cost = 36,000 * $10 = $360,000
Manufacturing Cost = 12,500 * $28 = $350,000
Operating Income for 2017 = $2,240,000 - $360,000 - $350,000
Operating Income for 2017 = $1,530,000

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