Sunny Dayz sells bottles of sunscreen lotion for $8.00 each.Variable costs are $4.50 per bottle,while fixed costs are $42,000 per month for volumes up to 20,000 bottles of lotion and $52,000 per month for volumes above 20,000 bottles of lotion.The flexible budget would reflect monthly operating income for 18,000 bottles of lotion and 23,000 bottles of lotion of what dollar amounts?

Question

Quizplus · Accepted Answer

For 18,000 bottles: Revenue = 18,000 * $8 = $144,000; Variable Costs = 18,000 * $4.50 = $81,000; Fixed Costs = $42,000; Operating Income = $144,000 - $81,000 - $42,000 = $21,000.  For 23,000 bottles: Revenue = 23,000 * $8 = $184,000; Variable Costs = 23,000 * $4.50 = $103,500; Fixed Costs = $52,000; Operating Income = $184,000 - $103,500 - $52,000 = $28,500.

Sunny Dayz Sells Bottles of Sunscreen Lotion for $8