Thank you If the company sells produces and sells 3,000 baskets how much operating income will they makeA) $150.000

Answered: If the company sells produces and sells…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Thank you

If the company sells produces and sells 3,000 baskets how much operating income will they make
A) $150.000

Expert Solution

Step 1

Direct material rate per unit = $16,000/2000 = $8 per unit

Direct Labour rate per unit = $14,000/2000 = $7 per unit

Manufacturing overhead per unit = $16,000/2000 = $8 per unit

Selling and Administrative Costs per unit = $10,000/2000 = $5 per unit

Variable cost per unit = Direct material rate per unit + Direct Labour rate per unit + Manufacturing overhead per unit + Selling and Administrative Costs per unit = 8 + 7 + 8 + 5 = $28 per unit

Contribution margin per unit = Sales price per unit - variable cost per unit = 50 - 28 = $22 per unit

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