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1 November, 07:16

The following static budget is provided: Units 27,000 Units Sales $ 270,000 Less variable costs: Manufacturing costs $ 94,500 Selling and administrative costs $ 56,700 Contribution margin $ 118,800 Less fixed costs: Manufacturing costs $ 29,700 Selling and administrative costs $ 17,550 Net income $ 71,550 What will budgeted net income equal if 25,000 units are produced and sold? (Do not round intermediate calculations.)

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  1. 1 November, 07:34
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    Net income 62,750

    Explanation:

    We solve for the contribution margin per unit. Then, we multiply this by the proposed level of activity and subtract the fixed cost:

    contribution margin 118,800

    units sales 27,000

    contribution per unit: 4.40

    If 25,000 units are produced:

    contribution margin 25,000 x 4.40 = 110,000

    fixed cost:

    manufacturing cost 29,700

    S&A cost 17,550

    total fixed 47,250

    Net income 62,750
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