Product A has a sales price of $10 per unit. Based on a 10,000-unit production level, the variable costs are $6 per unit and the fixed costs are $3 per unit. Using a flexible budget for 12,500 units, what is the budgeted operating income from Product A?
A) $12,500.
B) $25,000.
C) $20,000.
D) $30,000.
E) $35,000.

Question

Quizplus · Accepted Answer

The total budgeted revenue would be:

$10 x 12,500 = $125,000

Variable costs are $6 per unit, so for 12,500 units:

$6 x 12,500 = $75,000

Fixed costs are $3 per unit, so for 12,500 units:

$3 x 12,500 = $37,500

Therefore, the budgeted operating income would be:

$125,000 - $75,000 - $37,500 = $12,500

Product a Has a Sales Price of $10 Per Unit