Kevin Company Prepared the Following Static Budget for the Year

question 120

Multiple Choice

Kevin Company prepared the following static budget for the year 2015: $$\begin{array} { | l | c | r | } \hline \text { Static Budget } & & \\\hline \text { Units/volume } & & 5,000 \\\hline & \text { Per Unit } & \\\hline \text { Sales revenue } & \$ 3.00 & \$ 15,000 \\\hline \text { Variable expenses } & \$ 1.50 & \underline { 7,500 } \\\hline \text { Contribution margin } & & 7,500 \\\hline \text { Fixed expenses } & & \underline { 4,000 } \\\hline \text { Operating income/(loss) } & & \underline { \$ 3,500 } \\\hline\end{array}$$ If a flexible budget was prepared at a volume of 6,000, calculate the amount of operating income.

• A) $5,000
• B) $3,500
• C) $9,000
• D) $4,000

---

Definitions:

Venture Capital

Financing that investors provide to startup companies and small businesses believed to have long-term growth potential.

Start-up Firms

Newly established businesses, often in the early stage of development and research of their products or services.

Retained Earnings

The portion of a company's profits that is held or retained and not paid out as dividends to shareholders, often reinvested in the business.

Intrapreneurs

Employees within a company who are assigned to work on a special idea or project and are given the freedom to develop the project as an entrepreneur would.