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Chapter 2: 14BP_b (page 148)

International Data Systems鈥� information on revenue and costs is relevant only up to a sales volume of 105,000 units. After 105,000 units, the market becomes saturated and the price per unit falls from \(14.00 to \)8.80. Also, there are cost overruns at a production volume of over 105,000 units, and variable cost per unit goes up from \(7.00 to \)8.00. Fixed costs remain the same at $55,000.

b. Compute operating income at 205,000 units.

Short Answer

Expert verified

The Operating income of the company is $29,000.

Step by step solution

01

Contribution per unit

Contribution=Revenueperunit-Variablecostperunit=$8.80-$8=$0.80

02

Operating income

Operatingincome=Contribution脳No.ofunits-Fixedcost=$0.80脳105,000-$55,000=$29,000

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