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21 February, 00:51

Percy Corporation sells a unit of its product for $12.00, resulting in a contribution margin of $7.00 per unit. Fixed costs are budgeted at $50,000 per quarter for volumes up to 12,000 units and $80,000 for volumes exceeding 12,000 units. Prepare the flexible budget for the next quarter for volume level of 16,000 units, as follows:

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  1. 21 February, 01:15
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    Operating income = $62,000

    Explanation:

    As per the data given in the question,

    Budget for the next quarter for 16,000 units:

    Sales revenue = $192,000 (16,000*$12)

    Variable expenses = $80,000 (16,000 * ($12-$7))

    Fixed expense = $50,000

    Total expense = $130,000 ($80,000+$50,000)

    Operating income = $62,000 ($192,000-$130,000)
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