Ibis Paper Company Prepared the Following Static Budget for November

question 138

Multiple Choice

Ibis Paper Company prepared the following static budget for November: $$\begin{array} { | l | c | r | } \hline \text { Static Budget } & & \\\hline \text { Units/Volume } & & 12,000 \\\hline& \text { Per Unit }\\\hline \text { Sales Revenue } & \$ 20.00 & \$ 240,000 \\\hline \text { Variable Costs } & 8.00 & \underline { 96,000 }\\\hline \text { Contribution Margin } &&144,000 \\\hline \text { Fixed Costs } & & 13,500 \\\hline \text { Operating Income/(Loss) } & & \underline { \$130,500 } \\\hline\end{array}$$ If a flexible budget is prepared at a volume of 13,500 units,calculate the operating income at 13,500 units of production.The production level is within the relevant range.

• A) $162,000
• B) $144,000
• C) $130,500
• D) $148,500

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Definitions:

Price Elasticity of Demand

A measure of how much the quantity demanded of a good responds to a change in the price of that good, reflecting the sensitivity of quantity demanded to price changes.

Funeral Homes

Businesses that provide services related to the burial, cremation, funeral ceremonies, and management of the deceased's final arrangements.

Revenue

The total income generated by a firm from its business activities, typically from the sale of goods and services to customers, before any expenses are deducted.

Price Elasticity of Demand

A metric showing the sensitivity of demand for an item to its price alterations.