Madengrad Company manufactures a single product called a densimeter. This produc

Question

Madengrad Company manufactures a single product called a densimeter. This product is a density monitoring device attached to large industrial mixing machines used in flour, rubber, petroleum, and chemical manufacturing. A densimeter sells for $900 per unit. The following variable expenses are incurred to produce and sell each densimeter:

direct labor 180

direct materials 240

variable factory over head 105

variable marketing expense 75

Madengrad's annual fixed expenses are $6,600,000.

If Madengrad Company achieves a sales and production volume of 8,000 units, the annual net operating income (loss) is expected to be:

$(4,200,000)

$1,780,000

$(2,520,000)

$(420,000)

A.

$(4,200,000)

B.

$1,780,000

C.

$(2,520,000)

D.

$(420,000)

Explanation / Answer

Answer is A $(4,200,000)

Sales 900 direct labor 180 direct materials 240 variable factory over head 105 variable marketing expense 75 600 Contrbution Per Unit 300 Contribution 300*8000 2400000 Fixed cost 66,00,000 net operating (loss) -42,00,000

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