Peddlin' Pete's Cycles sells its entry-level bicycles for $400 each.Its variable cost is $250 per bicycle.Fixed costs are $35,000 per month for volumes up to 1,200 bicycles.Above 1,200 bicycles,monthly fixed costs are $55,000.What is the budgeted operating income at a level of 900 bicycles per month?
A)$100,000
B)$135,000
C)$325,000
D)$80,000

Question

Quizplus · Accepted Answer

A)
Revenue (# of units × selling price per unit)900 × 400 = $360,000
Variable Costs (# of units × variable cost per unit)900 × 250 = $225,000
Fixed expenses $35,000
Total expenses $260,000 = 225,000 + 35,000
Operating income 360,000 - 260,000 = $100,000

Peddlin' Pete's Cycles Sells Its Entry-Level Bicycles for $400 Each