Question

the following static budget is provided: units 20,000 units sales $ 200,000 less variable costs: manufacturing costs $ 70,000 selling and administrative costs $ 40,000 contribution margin $ 90,000 less fixed costs: manufacturing costs $ 22,000 selling and administrative costs $ 17,000 net income $ 51,000 what will budgeted net income equal if 21,000 units are produced and sold? (do not round intermediate calculations.) multiple choice $210,000 $53,550 $55,500 $94,500

Answer 1

If 21,000 units are made and sold, the net income is expected to be $42,000.

According to Knight, the contribution margin represents the total amount of revenue available after variable expenditures to cover fixed expenses and deliver profit to the organization. Consider this the portion of sales that helps to cover fixed costs.

The contribution margin is significant because it indicates how much of a product's income is available to pay fixed costs and contribute to the firm's profit.

Contribution margin per unit = $90,000/20,000

= $4.5 per unit

Hence total Contribution margin at 18000 units = (18000 × 4.5)

= $81000

Contribution margin                      81000

Less fixed costs:

Manufacturing costs                      $22000

Selling and administrative costs      $17000

Net income                                      $42,000

To learn more about the Contribution margin

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