A company's flexible budget for 10,000 units of production reflects sales of $200,000; variable costs of $40,000; and fixed costs of $75,000. Calculate the expected level of operating income if the company produces and sells 13,000 units.

Question

Quizplus · Accepted Answer

First, we need to calculate the flexible budget for 13,000 units:
- Variable costs per unit = Total variable costs / Units produced = $40,000 / 10,000 units = $4 per unit
- Flexible budget for 13,000 units:
Sales = 13,000 units x $20 per unit = $260,000
Variable costs = 13,000 units x $4 per unit = $52,000
Fixed costs remain the same at $75,000

Next, we can calculate the expected level of operating income:
Operating income = Sales - Variable costs - Fixed costs
Operating income = $260,000 - $52,000 - $75,000
Operating income = $133,000

Therefore, the answer is C.

A Company's Flexible Budget for 10,000 Units of Production Reflects