Sassy Company sells its widgets for $20 each. Its variable cost is $12 per widget. Fixed costs are $150,000 per month for volumes up to 70,000 widgets. Above 70,000 widgets, monthly fixed costs are $200,000.
Required:
1. What is the budgeted operating income at a level of 80,000 widgets per month?

$440,000

Explanation:

The BEP which is the break even point is the point where the company's sales or revenue generated is equal to the cost incurred. As such, the BEP is the number of units that must be sold for the company to make neither a profit nor a loss.

Both sales and variable cost are dependent on the number of units sold.

The sales less the variable cost gives the contribution margin. The contribution margin less the fixed cost gives the net operating income.

Budgeted operating income at a level of 80,000 widgets per month

= 80,000( $20 - $12) - $200,000

= $640,000 - $200,000

= $440,000

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