Based on a predicted level of production and sales of 30,000 units, a company anticipates total contribution margin of $105,000, fixed costs of $40,000, and operating income of $65,000. Based on this information, the budgeted operating income for 28,000 units would be:
A) $72,500.
B) $52,000.
C) $135,333.
D) $105,000.
E) $58,000.

Question

Quizplus · Accepted Answer

The contribution margin per unit is $105,000 / 30,000 = $3.50. For 28,000 units, the contribution margin is 28,000 * $3.50 = $98,000. Subtracting fixed costs of $40,000 gives an operating income of $58,000.

Based on a Predicted Level of Production and Sales of 30,000