Krazy Kayaks sells its entry-level kayaks for $650 each. Its variable cost is $300 per kayak. Fixed costs are $21,000 per month for volumes up to 1700 kayaks. Above 1700 kayaks, monthly fixed costs are $60,000. What is the budgeted operating income at a level of 400 kayaks per month?
A)$119,000
B)$140,000
C)$239,000
D)$80,000

Question

Quizplus · Accepted Answer

The budgeted operating income is calculated as follows:  Revenue = 400 kayaks * $650 = $260,000  Variable Costs = 400 kayaks * $300 = $120,000  Fixed Costs = $21,000 (since 400 kayaks is below 1700)  Operating Income = Revenue - Variable Costs - Fixed Costs = $260,000 - $120,000 - $21,000 = $119,000.

Krazy Kayaks Sells Its Entry-Level Kayaks for $650 Each