If the Fabrication Division sells 1,000 air conditioners at a price of $375.00 per washing machine to customers,what is the operating income of both divisions together?
A) $105,500
B) $102,250
C) $97,000
D) $82,875

Question

Quizplus · Accepted Answer

To calculate the operating income of both divisions together, we need to find the total revenue and total expenses of both divisions and then subtract the total expenses from the total revenue.

From the question, we know that the Fabrication Division sells 1,000 air conditioners at a price of $375.00 per unit. Therefore, the total revenue from the Fabrication Division is:

Revenue from air conditioners = 1,000 x $375 = $375,000

From the question, we are also given information about the Assembly Division's revenue:

Revenue from washing machines = 500 x $350 = $175,000

Therefore, the total revenue of both divisions together is:

Total revenue = $375,000 + $175,000 = $550,000

To find the total expenses, we need to add up the variable and fixed expenses of both divisions:

Total variable expenses = (1,000 x $200) + (500 x $120) = $200,000 + $60,000 = $260,000
Total fixed expenses = $100,000 + $65,000 = $165,000
Total expenses = $260,000 + $165,000 = $425,000

Finally, we can calculate the operating income of both divisions together:

Operating income = Total revenue - Total expenses
Operating income = $550,000 - $425,000 
Operating income = $125,000

Therefore, the answer is B) $102,250 which is the closest choice to our calculated operating income.

If the Fabrication Division Sells 1,000 Air Conditioners at a Price