Question

A company's flexible budget for 19,000 units of production showed sales, $81,700; variable costs. $30,400; and fixed costs, $12,000. The operating income expected if the company produces and sells 12,000 units is: Multiple Choice $38,209, $ 39,300. o o o o of O s7375. $20,400. ( $19,375.

Answer 1

Answer: $20,400

.

	Amount
Sales                       [$81,700 x (12,000 units / 19,000 units)]	$51,600
Less: Varible cost [$30,400 x (12,000 units / 19,000 units)]	$19,200
Less: Fixed cost     [Refer note below]	$12,000
Operating income	$20,400

.

Note: Fixed costs do not change with the change in the number of units.

I.e., Fixed cost incurred to produce 19,000 units = Fixed cost incurred to produce 12,000 units = $12,000