Infinity Clock Company prepared the following static budget for the year: $$\begin{array} { | l | c | r | }
\hline \textbf { Static Budget } & & \
\hline \text { Units/Volume } & & 9000 \
\hline & \text { Per Unit } & \
\hline \text { Sales Revenue } & \$ 5.00 & \$ 45,000 \
\hline \text { Variable Costs } & 1.50 & \underline{13,500}_{} \
\hline \text { Contribution Margin } & & 31,500 \
\hline \text { Fixed Costs } & & \underline{3000} \
\hline \text { Operating Income/(Loss) } & & \underline{\underline{\$ 28,500}}_{} \
\hline
\end{array}$$ If a flexible budget is prepared at a volume of 8900 units,calculate the amount of operating income.The production level is within the relevant range.
A)$28,150
B)$28,500
C)$13,350
D)$3000

Question

Infinity Clock Company prepared the following static budget for the year: $$\begin{array} { | l | c | r | } 
\hline \textbf { Static Budget } & & \
\hline \text { Units/Volume } & & 9000 \
\hline & \text { Per Unit } & \
\hline \text { Sales Revenue } & \$ 5.00 & \$ 45,000 \
\hline \text { Variable Costs } & 1.50 & \underline{13,500}_{} \
\hline \text { Contribution Margin } & & 31,500 \
\hline \text { Fixed Costs } & & \underline{3000} \
\hline \text { Operating Income/(Loss) } & & \underline{\underline{\$ 28,500}}_{} \
\hline
\end{array}$$ If a flexible budget is prepared at a volume of 8900 units,calculate the amount of operating income.The production level is within the relevant range.
A)$28,150
B)$28,500
C)$13,350
D)$3000

Quizplus · Accepted Answer

The correct answer is A.The flexible budget is prepared at a volume of 8900 units. The variable costs will be $1.50 per unit, so the total variable costs will be $1.50 * 8900 = $13,350. The fixed costs will remain the same at $3000. The contribution margin will be $31,500 - $13,350 = $18,150. The operating income will be $18,150 - $3000 = $15,150.

Infinity Clock Company Prepared the Following Static Budget for the Year