Reflecting on Family Furniture's Budgeted Operating Income for the Month
What is the budgeted operating income for Family Furniture for the month if it sells 175 tables?
A. $172,500
B. $50,000
C. $52,500
D. $175,000
Answer:
According to the given options, the budgeted operating income for the month, assuming Family Furniture sells 175 tables, is $50,000 (Option B).
Explanation:
In order to calculate the budgeted operating income for the month, we need to consider the fixed costs, variable costs, and total sales revenue of Family Furniture. Let's break down the calculation step by step:
1. Total Variable Costs:We are given that the variable cost per table is $700, and Family Furniture plans to sell 175 tables this month. Therefore, the total variable costs can be calculated as follows: Total Variable Costs = $700 x 175 = $122,500
2. Total Costs:By adding the fixed costs of $2,500 to the total variable costs, we can find the total costs: Total Costs = $2,500 + $122,500 = $125,000
3. Sales Revenue:The selling price per table is $1,000, and Family Furniture plans to sell 175 tables. Thus, the sales revenue can be calculated as: Sales Revenue = $1,000 x 175 = $175,000
4. Budgeted Operating Income:Finally, we can determine the budgeted operating income by subtracting the total costs from the sales revenue: Budgeted Operating Income = $175,000 - $125,000 = $50,000
Therefore, the budgeted operating income for the month, assuming Family Furniture sells 175 tables, is $50,000. This calculation shows the importance of considering both fixed and variable costs in determining the overall profitability of a business.