1 answer

Krazy Kayaks sells its entry-level kayaks for $750 each its variable cost is $500 per kayak...

Question:

Krazy Kayaks sells its entry-level kayaks for $750 each its variable cost is $500 per kayak Fixed costs are $25 000 per month
Krazy Kayaks sells its entry-level kayaks for $750 each its variable cost is $500 per kayak Fixed costs are $25 000 per month for volumes up to 1100 kayaks. Above 1,100 kayaks, monthly fixed costs are $60.000. What is budgeted operating income at a level of 2.500 kayak per month OA $500.000 OB. $1815.000 OC 5565.000 OD 125.000

Answers

GIven $
Selling price 750 per unit
Variable cost 500 per unit
Fixed costs up to 1100 units 25,000 per month
Fixed costs above 1100 units 60,000 per month

Since the number of units given in the question is above 1,100 (i.e.2,500), Krazy Kayaks will incur fixed costs of $60,000 which is applicable for units above 1,100.

Operating profit calculation is as follows:

Formula $
Sales (2,500 units*$750) =2500*750 18,75,000
less: Variable cost (2,500 units*$500) =2500*500 (12,50,000)
less: Fixed cost of $60,000 (60,000)
Operating Profit 5,65,000

Hence, option C - $5,65,000 is the solution.

.

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