Dukeman Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During February, the company budgeted for 7,100 units, but its actual level of activity was 7,060 units. The company has provided the following data concerning the formulas to be used in its budgeting:
-The net operating income in the planning budget for February would be closest to:
A)$16,930
B)$17,350
C)$16,885
D)$16,695

Question

Dukeman Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During February, the company budgeted for 7,100 units, but its actual level of activity was 7,060 units. The company has provided the following data concerning the formulas to be used in its budgeting: 
-The net operating income in the planning budget for February would be closest to:
A)$16,930 
B)$17,350 
C)$16,885 
D)$16,695

Quizplus · Accepted Answer

To calculate the net operating income in the planning budget for February, we need to subtract the total variable expenses and fixed expenses from the total sales revenue.
Total sales revenue = $55,000
Total variable expenses = ($22,500 + 7%*$55,000) = $26,650
Total fixed expenses = $10,000
Net operating income = $55,000 - $26,650 - $10,000 = $18,350
Therefore, the closest option is B, $17,350.

Dukeman Corporation Manufactures and Sells a Single Product