Based on a predicted level of production and sales of 22,000 units,a company anticipates total variable costs of $99,000,fixed costs of $30,000,and operating income of $36,000.Based on this information,the budgeted amount of sales for 20,000 units would be:
A)$165,000.
B)$150,000.
C)$117,272.
D)$181,500.
E)$141,900.

Question

Quizplus · Accepted Answer

Using the high-low method, we can determine the variable cost per unit:
Variable cost per unit = (Total variable cost at 22,000 units - Total variable cost at 20,000 units) / (22,000 units - 20,000 units)
Variable cost per unit = ($99,000 - ?) / (2,000 units)
Variable cost per unit = $0.50

Using the formula for income:
Income = Sales - Variable Costs - Fixed Costs

We can rearrange the formula to solve for sales:
Sales = Income + Variable Costs + Fixed Costs
Sales = $36,000 + ($0.50 x 22,000) + $30,000
Sales = $36,000 + $11,000 + $30,000
Sales = $77,000

Therefore, the budgeted amount of sales for 20,000 units would be:
Sales at 20,000 units = ($0.50 x 20,000) + $30,000 + $36,000
Sales at 20,000 units = $10,000 + $30,000 + $36,000
Sales at 20,000 units = $76,000

The closest option to this value is (B) $150,000.

Based on a Predicted Level of Production and Sales of 22,000