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5. Wilson Company prepared the following preliminary budget assuming no advertising expenditures: Sales 1265,000 Selling pric
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Answer #1

Answer is $205,000

Selling Price per unit = $10 + 15% * $10
Selling Price per unit = $11.50

Unit Sales = 100,000 + 10% * 100,000
Unit Sales = 110,000

Variable Cost per unit = Variable Expenses / Unit Sales
Variable Cost per unit = $600,000 / 100,000
Variable Cost per unit = $6.00

Fixed Expenses = $300,000 + $100,000
Fixed Expenses = $400,000

Net Operating Income = Unit Sales * (Selling Price per unit - Variable Cost per unit ) - Fixed Expenses
Net Operating Income = 110,000 * ($11.50 - $6.00) - $400,000
Net Operating Income = 110,000 * $5.50 - $400,000
Net Operating Income = $605,000 - $400,000
Net Operating Income = $205,000

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