Pluto Company sold 2,000 units in October at a price of $35 per unit. The variable cost is $20 per unit. The monthly fixed costs are $10,000. What is the operating income earned in October?

Question

Quizplus · Accepted Answer

We can use the formula for calculating operating income:

Operating Income = (Sales Price per Unit x Number of Units) - (Variable Cost per Unit x Number of Units) - Fixed Costs

Plugging in the given values, we get:

Operating Income = ($35 x 2,000) - ($20 x 2,000) - $10,000
Operating Income = $70,000 - $40,000 - $10,000
Operating Income = $20,000

Therefore, the operating income earned in October was $20,000.

Pluto Company Sold 2,000 Units in October at a Price