Based on a Predicted Level of Production and Sales of 22,000

question 28

Multiple Choice

Based on a predicted level of production and sales of 22,000 units, a company anticipates total variable costs of $99,000, fixed costs of $30,000, and operating income of $36,000.
-Based on this information, the budgeted amount of operating income for 20,000 units would be:

• A) $32,727.
• B) $30,000.
• C) $150,000.
• D) $69,000.
• E) $60,000.

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Definitions:

Cost Center

A division or department within a business that does not directly contribute to profit but incurs costs, used for budgeting and controlling expenses.

Level of Management

Refers to the hierarchy within an organization's structure, typically including top-level, middle-level, and lower-level management.

Direct Expense

Costs that can be directly traced to a product, service, or specific cost center, such as raw materials and labor.

Sales Commission Expense

A cost incurred by a company to compensate its sales staff, based on a percentage of the sales they achieve.