Answer:
a. $534,000
b. $271,550
Explanation:
a. Compute operating income at 121,000 units
Using this formula
Operating Income = (Price per unit - Variable cost per unit)*Units - Fixed costs
Let plug in the formula
Operating Income = ($10.00 - $5.00)*121,000 - $71,000
Operating Income = ($5.00)*121,000 - $71,000
Operating Income =$605,000-$71,000
Operating Income = $534,000
Therefore operating income at 121,000 units is $534,000
b. Compute operating income at 221,000 units
Using this formula
Operating Income = (Price per unit - Variable cost per unit)*Units - Fixed costs
Let plug in the formula
Operating Income = ($6.80 - $5.25)*221,000 - $71,000
Operating Income = $1.55*221,000-$71,000
Operating Income = $342,550-$71,000
Operating Income = $271,550
Therefore operating income at 121,000 units at 221,000 units is $271,550
