Question

A company's flexible budget for 12,000 units of production showed total contribution margin of $24,000 and fixed costs, $16,000. The operating income expected if the company produces and sells 15,000 units is:________
a) $34,000.
b) $10,000.
c) $18,667.
d) $8,000.
e) $14,000.

Answer 1

Answer:

e. $14,000

Explanation:

Operating income for 15,000 units = Proportionate contribution - Fixed cost

Operating income for 15,000 units = [($24,000/12,000)*15,000] - $16,000

Operating income for 15,000 units = $30,000 - $16,000

Operating income for 15,000 units = $14,000

So, the operating income expected if the company produces and sells 15,000 units is $14,000.