Infinity Clock Company prepared the following static budget for the year: Static Budget Units/Volume 9 comma 000 Per Unit Sales Revenue $ 5.00 $ 45 comma 000 Variable Costs 1.50 13 comma 500 Contribution Margin 31 comma 500 Fixed Costs 3 comma 000 Operating Income / (Loss) $ 28 comma 500 If a flexible budget is prepared at a volume of 9 comma 800 units, calculate the amount of operating income. The production level is within the relevant range.

Question

Cecilia Gibbs

Business

26 July, 19:41

Infinity Clock Company prepared the following static budget for the year: Static Budget Units/Volume 9 comma 000 Per Unit Sales Revenue $ 5.00 $ 45 comma 000 Variable Costs 1.50 13 comma 500 Contribution Margin 31 comma 500 Fixed Costs 3 comma 000 Operating Income / (Loss) $ 28 comma 500 If a flexible budget is prepared at a volume of 9 comma 800 units, calculate the amount of operating income. The production level is within the relevant range.

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Marshall Cain · Answer 1

Net operating income = 31,300

Explanation:

Giving the following information:

Static Budget:

Units = 9,000

Selling price per unit = $5

Variable Costs per unit = $1.50

Fixed Costs = 3,000

We need to determine the operating income if 9,800 units were sold:

Sales = (9,800*5) = 49,000

Total variable costs = (9,800*1.5) = (14,700)

Contribution margin = 34,300

Fixed costs = (3,000)

Net operating income = 31,300