Ask Question
20 December, 10:12

Assume Mussa Company has the following information available:

Selling price per unit $100

Variable cost per unit $45

Fixed costs per year $420,000

Expected sales per year (units) 20,000

If fixed costs increase by $200,000, what is the expected operating income?

A) $280,000

B) $480,000

C) $680,000

D) $1,380,000

+3
Answers (1)
  1. 20 December, 13:07
    0
    B) $480,000

    Explanation:

    In this question we compare the operating income

    In the first case,

    The operating income is

    = Contribution margin - fixed cost

    where,

    = (Selling price per unit - Variable cost per unit) * Expected sales units per year

    = ($100 - $45) * 20,000 units

    = $1,100,000

    And, the fixed cost is $420,000

    So, the operating income is

    = $1,100,000 - $420,000

    = $680,000

    In the second case,

    The operating income is

    = Contribution margin - fixed cost

    where,

    = (Selling price per unit - Variable cost per unit) * Expected sales units per year

    = ($100 - $45) * 20,000 units

    = $1,100,000

    And, the fixed cost is $420,000 + $200,000 = $620,000

    So, the operating income is

    = $1,100,000 - $620,000

    = $480,000
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Assume Mussa Company has the following information available: Selling price per unit $100 Variable cost per unit $45 Fixed costs per year ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers