Peddlin' Pete's Cycles sells its entry-level bicycles for $400 each.Its variable cost is $250 per bicycle.Fixed costs are $35,000 per month for volumes up to 1,200 bicycles.Above 1,200 bicycles,monthly fixed costs are $55,000.What is the budgeted operating income at a level of 1,300 bicycles per month?
A)$195,000
B)$465,000
C)$140,000
D)$160,000

Question

Quizplus · Accepted Answer

C)
Revenue (# of units × selling price per unit)1,300 × 400 = $520,000
Variable Costs (# of units × variable cost per unit)1,300 × 250 = $325,000
Fixed expenses $55,000
Total expenses 325,000 + 55,000 = 380,000
Operating income 520,000 - 380,000 = 140,000

Peddlin' Pete's Cycles Sells Its Entry-Level Bicycles for $400 Each