Infinity Clock Company Prepared the Following Static Budget for the Year

question 136

Multiple Choice

Infinity Clock Company prepared the following static budget for the year: $$\begin{array} { | l | c | r | } \hline \text { Static Budget } & & \\\hline \text { Units/Volume } & & 9000 \\\hline& \text { Per Unit } \\\hline \text { Sales Revenue } & \$ 5.00 & \$ 45,000 \\\hline \text { Variable Costs } & 1.50 & \underline { 13,500 } \\\hline \text { Contribution Margin } &&31,500 \\\hline \text { Fixed Costs } & & \underline { 3000 }\\\hline \text { Operating Income/(Loss) } & & \underline { \$28,500 } \\\hline\end{array}$$ If a flexible budget is prepared at a volume of 8900 units, calculate the amount of operating income. The production level is within the relevant range.

• A) $28,150
• B) $28,500
• C) $13,350
• D) $3000

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Definitions:

Dollar Contribution

The amount of money that a particular product, service, or business unit contributes to the overall profit of a company.

Strategy

How an organization expects to achieve its missions and goals.

Pareto Analysis

A statistical technique in decision-making used for the selection of a limited number of tasks that produce significant overall effect. It uses the principle that 80% of results come from 20% of the effort.

Assembly Drawing

An exploded view of the product.