Answer the following questions using the information below:
Dr. Charles Hunter, MD, performs a certain outpatient procedure for $1,000. His fixed costs are $20,000, while his variable costs are $500 per procedure. Dr. Hunter currently plans to perform 200 procedures this month.
-What is the budgeted operating income for the month assuming that Dr. Hunter plans to perform the procedure 200 times?
A)$200,000
B)$100,000
C)$80,000
D)$40,000

Question

Quizplus · Accepted Answer

The total revenue from performing 200 procedures at $1,000 each is:
200 x $1,000 = $200,000
The total variable cost of performing 200 procedures at $500 per procedure is:
200 x $500 = $100,000
The total contribution margin is $200,000 - $100,000 = $100,000
The operating income is then calculated as:
Operating income = Contribution margin - Fixed costs
Operating income = $100,000 - $20,000 = $80,000
Therefore, the budgeted operating income for the month is $80,000. Option C is correct.

Answer the Following Questions Using the Information Below