International Data Systems information on revenue and costs is only relevant up

Question

International Data Systems information on revenue and costs is only relevant up to a sales volume of 115,000 units. After 115,000 units, the market becomes saturated and the price per unit falls from $16.00 to $9.80. Also, there are cost overruns at a production volume of over 115,000 units, and variable cost per unit goes up from $8.00 to $8.25. Fixed costs remain the same at $65,000. Compute operating income at 115,000 units. Operating Income? Compute operating income at 215,000 units. Operating Income?

Explanation / Answer

operaing income at (115000) = (16-8)*115000 - 65000 = $855,000

operating income at(215000) = (9.8-8.25)*215000 - 65000 = $268,250

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