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)$52,000.
B)$135,333.
C)$58,000.
D)$72,500.
E)$105,000.

Question

Quizplus · Accepted Answer

Using the equation formula: 
Operating Income = Total Contribution Margin - Fixed Costs

We can solve for the budgeted operating income for 30,000 units:

$65,000 = $105,000 - $40,000

To find the budgeted operating income for 28,000 units, we can use the same formula:

Operating Income = Total Contribution Margin - Fixed Costs

We need to solve for the Total Contribution Margin for 28,000 units:

Total Contribution Margin = Operating Income + Fixed Costs

Total Contribution Margin = $65,000 + $40,000 
Total Contribution Margin = $105,000

Now we can use the Total Contribution Margin for 28,000 units and solve for the operating income:

Operating Income = Total Contribution Margin - Fixed Costs 
Operating Income = $105,000 - $40,000 
Operating Income = $65,000

Therefore, the budgeted operating income for 28,000 units is $65,000.

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