Question

Goodson Inc. produces and sells a single product. The company had provided its contribution format income statement for March.

Sales (4,500 units) = $427,500. Variable costs = 265,500. Contribution margin = 162,000. Fixed costs = 135,300. Operating profit - $26,700. If the company sells 4,300 units, its operating profit should be closest to: A) $26,700. B) $19,500. C) $7,700. D) $25,513.

Answer 1

Correct Answer—(B) $19,500

Calcuylations

Working
Calculation of sales price and Variable cost per unit
		Units	Per unit
Sales	$ 427,500.00	4500	$    95.00
Variable cost	$ 265,500.00	4500	$    59.00
Contribution margin	$ 162,000.00	4500	$    36.00

Income statement
Sales	(4300 x 95)	$ 408,500.00
Variable cost	(4300 x 59)	$ 253,700.00
Contribution margin		$ 154,800.00
Fixed cost		$ 135,300.00
Operating Profit		$    19,500.00

Fixed cost remains the same at every level of activity.