US CMA Part 2 · Chapter 5 · Question 11 of 15
Upland Pumps sells 14,000 units at $120 each. Variable cost is $70 per unit and fixed costs are $540,000. What is operating income?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) $160,000
Explanation
Contribution margin = ($120 - $70) x 14,000 = $50 x 14,000 = $700,000. Operating income = $700,000 - $540,000 = $160,000.
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