Question

Video Co. manufactures two products, A and B. The following information was gathered:

A                        B

                                Selling price per unit                                  $54.00               $66.00

                                Variable cost per unit                                   39.00                 54.00

                                Total fixed costs                                                    $25,000

Video Co. manufactures and sells three units of A for every two units of B. If the company sold 1,500 units of A, it would report operating income (loss) of:

Question 2 options:

	$34,500
	$22,500
	$(25,000)
	$9,500

Answer 1

Units sold for B = 1500 / 3 x 2 = 1000 units

	A	B	Total
Sales	$          81,000	$          66,000	$         147,000
Variable Costs	$          58,500	$          54,000	$         112,500
Contribution Margin	$          22,500	$          12,000	$           34,500
Fixed Costs			$           25,000
Net Operating Income			$             9,500

Answer is d. $9500