Budgeted Operating Income Calculation at Krazy Kayaks
What is the budgeted operating income at a level of 2,500 kayaks per month?
Given the following information:
- Selling price per kayak: $750
- Variable cost per kayak: $500
- Fixed costs up to 1,100 kayaks: $25,000 per month
- Fixed costs above 1,100 kayaks: $60,000 per month
- Sales volume: 2,500 kayaks per month
Answer:
Net operating income = $565,000
To calculate the budgeted operating income at a sales volume of 2,500 kayaks per month for Krazy Kayaks, we need to consider the following:
Sales Revenue:
Number of kayaks sold = 2,500
Selling price per kayak = $750
Total Sales Revenue = 2,500 kayaks * $750 = $1,875,000
Cost of Goods Sold (COGS):
Variable cost per kayak = $500
Total Variable Costs = 2,500 kayaks * $500 = $1,250,000
Gross Profit:
Gross Profit = Total Sales Revenue - COGS
Gross Profit = $1,875,000 - $1,250,000 = $625,000
Fixed Costs:
Fixed costs up to 1,100 kayaks = $25,000 per month
Fixed costs above 1,100 kayaks = $60,000 per month
Operating Income:
Operating Income = Gross Profit - Total Fixed Costs
Operating Income = $625,000 - $60,000 = $565,000
Therefore, the budgeted operating income at a level of 2,500 kayaks per month for Krazy Kayaks is $565,000.