Question

The following data is available for Radium Company:

Total fixed costs $150,000
Variable cost per unit $12
Selling price per unit $20
Units sold 30,000

Based on the given data, calculate Radium's operating income.

Answer 1

Radium's operating income is calculated by subtracting total costs from total revenue, and the result is an operating income of $90,000.

Step-by-step explanation:

To calculate Radium's operating income, we need to determine the total revenue and then subtract the total fixed costs and total variable costs from this amount. The total revenue is calculated by multiplying the selling price per unit by the units sold. Therefore, Radium's total revenue is 30,000 units × $20 = $600,000. The total variable costs are computed by multiplying the variable cost per unit by the units sold, which gives us 30,000 units × $12 = $360,000. Adding the total fixed costs of $150,000 to this amount, we get total costs of $510,000. The operating income, therefore, is total revenue minus total costs, or $600,000 - $510,000 = $90,000.