Ibis Paper Company prepared the following static budget for November: Static Budget Units/Volume 11 comma 000 Per Unit Sales Revenue $ 20.00 $ 220 comma 000 Variable Costs 6.00 66 comma 000 Contribution Margin 154 comma 000 Fixed Costs 13 comma 500 Operating Income / (Loss) $ 140 comma 500 If a flexible budget is prepared at a volume of 13 comma 600 units, calculate the operating income. The production level is within the relevant range.

Question

Mccoy

Business

12 April, 10:38

Ibis Paper Company prepared the following static budget for November: Static Budget Units/Volume 11 comma 000 Per Unit Sales Revenue $ 20.00 $ 220 comma 000 Variable Costs 6.00 66 comma 000 Contribution Margin 154 comma 000 Fixed Costs 13 comma 500 Operating Income / (Loss) $ 140 comma 500 If a flexible budget is prepared at a volume of 13 comma 600 units, calculate the operating income. The production level is within the relevant range.

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Ben Watson · Answer 1

If a flexible budget is prepared at a volume of 13 comma 600 units, Operating Income (gain) $176,900

Explanation:

The production level is within the relevant range. If a flexible budget is prepared at a volume of 13 comma 600 units, Fixed Costs will not change.

Total Sales = Sales per unit x 13,600 = $20.00 x 13,600 = $272,000

Total Variable costs = $6.00 x 13,600 = $81,600

Operating Income = Total Sales - Total Variable costs - Fixed Costs = $272,000 - $81,600 - $13,500 = $176,900