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

The operating income is calculated as sales minus variable costs and fixed costs. For 13,000 units, sales are $260,000 (13,000 units x $20 per unit), variable costs are $52,000 (13,000 units x $4 per unit), and fixed costs remain $75,000. Thus, operating income is $260,000 - $52,000 - $75,000 = $133,000.

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