Question
The Software Development Company produces computer programs on DVDs for home computers. This business is highly automated, causing fixed costs to be very high, but
The Software Development Company produces computer programs on DVDs for home computers. This business is highly automated, causing fixed costs to be very high, but variable costs are minimal. The company is organized along three product lines: games, business programs, and educational programs. The average standard selling prices for each are $16 for games, $55 for business programs, and $20 for educational programs. The standard variable cost consists solely of one DVD per program at $2 per DVD, without regard to the type of program. Fixed costs for the period were estimated at $535,000. For the current period, the firm expected to sell 40,000 games, 2,000 business programs, and 10,000 educational programs. Actual results are as follows.
Calculate expected standard pretax income.
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