Question

A company's flexible budget for 12,000 units of production showed sales, $48,000; variable costs, $18,000; and fixed costs, $16,000. The operating income expected if the company produces and sells 16,000 units is: Select one:

Answer 1

Answer:

$24,000

Explanation:

Selling price per unit:

= Sales ÷ units produced

= $48,000 ÷ 12,000

= $4

Variable cost per unit:

= variable costs ÷ units produced

= $18,000 ÷ 12,000

= $1.5

Fixed cost = $16,000

Net operating income if the company produces and sells 16,000 units:

= Sale - Variable cost - Fixed cost

= (16,000 × $4) - (16,000 × $1.5) - $16,000

= $64,000 - $24,000 - $16,000

= $24,000