What Would Target Operating Income Be When Fixed Costs Equal

question 72

Multiple Choice

What would target operating income be when fixed costs equal $6,000, unit contribution margin equals $40.00, and the number of units equals 400?

• A)$6,000
• B)$10,000
• C)$16,000
• D)$20,000
• E)$60,000

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Definitions:

Periodic Inventory System

An accounting method that determines inventory levels and cost of goods sold at the end of an accounting period through physical counting.

Purchases Discounts

Reductions in price given by suppliers on goods and services purchased, typically awarded for early payment.

Freight In

Costs associated with getting raw materials, goods, and merchandise transported from suppliers to a company, treated as part of inventory cost.

Multiple-Step Income Statement

A detailed financial statement that separates operating revenues and expenses from non-operating ones, presenting a clear picture of a company's financial performance.