Answer:
C) $420,000
Explanation:
<u>Barnes Corporation</u>
<u> Master budget Flexible budget</u>
<em> 150,000 games 180,000 games</em>
Revenue $2,400,000 $2,880,000
Cost of goods sold:
Direct materials $675,000 $810,000
Direct labor $300,000 $360,000
Variable Overhead $450,000 $540,000
Contribution Margin $975,000 $ 1170,000
Fixed overhead $250,000 $ 250,000
<u>Fixed selling and administration $500,000 $500,000 </u>
<u>Operating income $225,000 $420,000</u>
<u></u>
We calculate each term by dividing the cost by 150,000 units and multiplying the unit cost with the actual units 180,000. It is assumed that the fixed costs remain constant for the range of units from 150,000 - 200,000.
This gives an operating income of $ 420,000