Summer Nights sells bottles of bug spray for $6.50 each.Variable costs are $3.00 per bottle,while fixed costs are $44,000 per month for volumes up to 30,000 bottles of spray and $54,000 per month for volumes above 30,000 bottles of spray.The flexible budget would reflect monthly operating income for 19,000 bottles of lotion and 24,000 bottles of lotion of what dollar amounts?
A)$79,500 and $40,000,respectively
B)$22,500 and $40,000,respectively
C)$123,500 and $156,000,respectively
D)$12,500 and $102,000,respectively

Question

Quizplus · Accepted Answer

B)
Flexible Budget Level 1 output Level 2 output
Output units 19,000 24,000
Revenue $123,500 $156,000
(# of units × selling price)(19,000 × 6.50)(24,000 × 6.50)
Variable Costs $57,000 $72,000
(# of units × variable cost per unit)(19,000 × 3.00)(24,000 × 3.00)
Fixed expenses $44,000 $44,000
Total expenses $101,000 $116,000
(57,000 + 44,000)(72,000 + 44,000)
Operating income $22,500 $40,000
(123,500 - 101,000)(156,000 - 116,000)

Summer Nights Sells Bottles of Bug Spray for $6