Myer Appliances sells its microwave ovens for $110 each.Its variable cost is $65 per microwave oven.Fixed costs are $90,000 per month for volumes up to 2,000 microwave ovens.Above 2,000 microwave ovens,monthly fixed costs are $135,000.What is the budgeted operating income (loss)at a sales level of 2,500 microwave ovens per month?

Question

Quizplus · Accepted Answer

The correct answer is A. Operating loss of $22,500.Explanation:At a sales level of 2,500 microwave ovens per month, the total revenue is $110 * 2,500 = $275,000. The variable cost is $65 * 2,500 = $162,500. The fixed cost is $135,000. The total cost is $162,500 + $135,000 = $297,500. The operating income (loss) is $275,000 - $297,500 = -$22,500.

Myer Appliances Sells Its Microwave Ovens for $110 Each