The following static budget is provided: Units 27,000 Units Sales $ 270,000 Less variable costs: Manufacturing costs $ 94,500 Selling and administrative costs $ 56,700 Contribution margin $ 118,800 Less fixed costs: Manufacturing costs $ 29,700 Selling and administrative costs $ 17,550 Net income $ 71,550 What will budgeted net income equal if 25,000 units are produced and sold? (Do not round intermediate calculations.)

Question

Business

Alannah Trevino

9 July, 09:55

The following static budget is provided: Units 27,000 Units Sales $ 270,000 Less variable costs: Manufacturing costs $ 94,500 Selling and administrative costs $ 56,700 Contribution margin $ 118,800 Less fixed costs: Manufacturing costs $ 29,700 Selling and administrative costs $ 17,550 Net income $ 71,550 What will budgeted net income equal if 25,000 units are produced and sold? (Do not round intermediate calculations.)

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Answers (1)

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Dalia Juarez · Answer 1

Net income 62,750

Explanation:

We solve for the contribution margin per unit. Then, we multiply this by the proposed level of activity and subtract the fixed cost:

contribution margin 118,800

units sales 27,000

contribution per unit: 4.40

If 25,000 units are produced:

contribution margin 25,000 x 4.40 = 110,000

fixed cost:

manufacturing cost 29,700

S&A cost 17,550

total fixed 47,250

Net income 62,750