Question

Krazy Kayaks sells its entryminuslevel kayaks for​ $750 each. Its variable cost is​ $500 per kayak. Fixed costs are​ $25,000 per month for volumes up to​ 1,100 kayaks. Above​ 1,100 kayaks, monthly fixed costs are​ $60,000. What is the budgeted operating income at a level of​ 2,500 kayaks per​ month?
A. ​$565,000
B. ​$1,815,000
C. ​$600,000
D. ​$625,000

Answer 1

Answer:

A. ​$565,000

Explanation:

The computation of the budgeted operating income is shown below:

Sales revenue ($750 × 2,500)                      $1,875,000

Less: Variable cost ($500 ×2,500)               $1,250,000

Contribution margin                                       $625,000

Less: Fixed cost                                              $60,000

Budgeted operating income                        $565,000