Frames, Inc. manufactures, produces, and sells picture frames. The frame sells for $25 and the variable operating costs per unit are $12.

Frames, Inc. manufactures, produces, and sells picture frames. The frame sells for $25 and the variable operating costs per unit are $12. The managerial accountant reported fixed costs of $50,000 per month, which produces a sales volume of 25,000 frames. The manager needs to sell 26,000 frames to meet the sales quota and incur no more than $70,000 of fixed costs.

The flexible budget, with a sales volume of 30,000 frames, would show operating income of:

ANSWER

INCORRECT

• 
  $32,000
• 
  $23,000
• 
  YOU WERE SURE AND INCORRECT

  $230,000
• 
  THE CORRECT ANSWER

  $320,000
• 
  I DON'T KNOW YET

The operating income for a sales volume of 30,000 frames on the flexible budget is $320,000. The other answers are not correct.

Sales Revenue (units × selling price) = 30,000 × $25 = $750,000

Variable Costs (units × variable cost per unit) = 30,000 × $12 = $360,000

Fixed Expenses =  $70,000

Total Expenses = $360,000 + $70,000 = $430,000

Total Operating Income= $750,000 - $430,000 = $320,000 shown on the flexible budget