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30 June, 05:12

Brodrix Company expects to produce 20,500 units for the year ending December 31. A flexible budget for 20,500 units of production reflects sales of $533,000; variable costs of $61,500; and fixed costs of $142,000. If the company instead expects to produce and sell 27,600 units for the year, calculate the expected level of income from operations.

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  1. 30 June, 08:28
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    At 20,500 units = $329,500

    At 27,600 units = $492,800

    Explanation:

    For computing the income from operations, first, we have to determine the selling price per unit and the variable cost per unit which is shown below:

    Selling price per unit = Sales : production units

    = $533,000 : 20,500 units

    = $26

    And, variable cost per unit = Variable cost : production units

    = $61,500 : 20,500 units

    = $3

    At 20,500 units, the income from operations would be

    = Sales - variable cost - fixed cost

    = $533,000 - $61,500 - $142,000

    = $329,500

    At 27,600 units, the income from operations would be

    = Sales - variable cost - fixed cost

    = $717,600 - $82,800 - $142,000

    = $492,800

    The sales would be = 27,600 * $26 = $717,600

    And, the variable cost = 27,600 * $3 = $82,800
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