Summer Nights sells bottles of bug spray for $ 9.00 each. Variable costs are $ 4.00 per bottle, while fixed costs are $ 40 comma 000 per month for volumes up to 40 comma 000 bottles of spray and $ 58 comma 000 per month for volumes above 40 comma 000 bottles of spray. The flexible budget would reflect monthly operating income for 23 comma 000 bottles of spray and 31 comma 000 bottles of spray of what dollar amounts?

Question

Priscilla Boyer

Business

16 August, 05:51

Summer Nights sells bottles of bug spray for $ 9.00 each. Variable costs are $ 4.00 per bottle, while fixed costs are $ 40 comma 000 per month for volumes up to 40 comma 000 bottles of spray and $ 58 comma 000 per month for volumes above 40 comma 000 bottles of spray. The flexible budget would reflect monthly operating income for 23 comma 000 bottles of spray and 31 comma 000 bottles of spray of what dollar amounts?

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Answers (1)

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Gia Sellers · Answer 1

Operating Income $75,000 $115,000

Explanation:

The computation of the operating income reflected is shown below:

Units 23,000 $31,000

Contribution Margin per Unit $5 $5

Contribution Margin (Units * Per Unit) $115,000 $155,000

Less : Fixed Cost - $40,000 - $40,000

Operating Income $75,000 $115,000

The contribution margin per unit is come from

= Selling price per unit - variable cost per unit

= $9 - $4

= $5