Answer:
The correct answer is $8,500
Explanation:
Total sales $48,000 with 16,000 units
Variable cost $24,000
Fixed cost $17,000
First we need to know the variable cost per unit.
$24,000(variable cost) / 16,000 (units sold) = $1.5 (variable cost per unit)
Then we need to know the price of each article
48,000 (total sales) / 16,000 (units)= $3 (sells price per unit)
Then we replace at the formula "production cost"
(units to sell "if the company produces and sells" * variable cost per unit) + fixed cost = Production cost <u>(for the units produced. if the units change, the production cost change too)</u>
$17,000(units to produce and sell)* 1.5 variable cost per unit =25,500/ 17,000(fixed cost) = $42,500 Production cost.
Finally the question says: "if the company produce and sells"
So we need to know the total amount in dollars that we receive for the products.
$3 (sells price per unit) * 17,000 (new units sold) = $51,000 money received
Operating income if the company produces and sells 17,000
$51,000 (money received) - $42,500 (production cost for the 17,000 units) = $8,500
