Answer:
Operating income = 230000
Operating income = 175000
Operating income = 257500
Explanation:
Assuming that Harding expects to sell 50000, 40000, 55000 units in January, February and March respectively and has a selling price of $15 per unit. Assuming that the variable and fixed costs are as follows;
material $5
labor $3
variable overheads $1.5
total fixed overhead $45000
The operating income in each of the three months would be as follows:
January
Sales = $15×50000
Sales = $750000
total variable costs = ($5 ×50000) + ($3 ×50000) + ($1.5 ×50000)
total variable costs = $475000
Operating income = $750000 - $475000 - $45000
Operating income = 230000
February
Sales = $15×40000
Sales = $600000
total variable costs = ($5 ×40000) + ($3 ×40000) + ($1.5 ×40000)
total variable costs = $475000
Operating income = $600000 - $380000 - $45000
Operating income = 175000
March
Sales = $15×55000
Sales = $825000
total variable costs = ($5 ×55000) + ($3 ×55000) + ($1.5 ×55000)
total variable costs = $522500
Operating income = $825000 - $522500 - $45000
Operating income = 257500
