Product A has a sales price of $10 per unit. Based on a 10,000-unit production level, the variable costs are $6 per unit and the fixed costs are $3 per unit. Using a flexible budget for 12,500 units, what is the budgeted operating income from Product A?

$20,000

Explanation:

Flexible budget is a type of budget that is adjusted for varied volume of output in order to arrive at a more realistic value.

In this scenario , unit sales price and the variable cost of product A will be used to calculate the sales turnover of the 12,500 units of product a and the corresponding variable cost. However , the fixed cost being unchanged during over the production period , remain the same that was used for the production of 10,000 units of product A.

Workings

Sales Revenue           12,500*10             125,000

Variable cost               12,500*5             (  75,000)

Fixed cost                    10,000*3              ( 30,000)

Operating income                                       20,000

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