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A company's flexible budget for 24,000 units of production showed total contribution margin of $93,600 and fixed costs, $31,200. The operating income expected if the company produces and sells 29,000 units is:

a. $81,900.
b. $105,300.
c. $11,700.
d. $62,400.
e. $18,400.

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Answer:

a. $81,900.

Explanation:

The contribution margin per unit is obtained by dividing the total contribution margin by the 24,000 units produced.

[tex]CM = \frac{\$93,600}{24,000} = \$3.9\ per\ unit[/tex]

The expected operating income is given by the contribution margin minus the fixed costs. For 29,000 units sold, the operating income is:

[tex]I = \$3.9*29,000 - \$31,200\\I=\$81,900[/tex]

The answer is a. $81,900.

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