A manufacturing company that produces a single product has provided the followin
ID: 2399561 • Letter: A
Question
A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:
Selling price -------------------------------------- $140
Units in beginning inventory ----------------- 0
Units produced ---------------------------------- 1,200
Units sold ----------------------------------------- 800
Units in ending inventory --------------------- 400
Variable costs per unit:
Direct materials ------------------------------- $25
Direct labor ------------------------------------ $41
Variable manufacturing overhead ------- $6
Variable selling and administrative ------ $6
Fixed costs:
Fixed manufacturing overhead ----------- $24,000
Fixed selling and administrative ---------- 12,000
What is the net operating income for the month under variable costing?
$21,600
($15,200)
$8,000
$13,600
a.$21,600
b.($15,200)
c.$8,000
d.$13,600
Explanation / Answer
Ans. Detemination of Unit Product Cost (Under Variable Costing): Particulars Amt.($) Direct Material 25 Direct Labor 41 Variable Manuf. Overhead 6 Cost per unit $ 72 Income Statement under Variable Costing Particulars Amt.($) Amt.($) Sales (800 x $140) $ 112,000 Variable Cost of Goods sold: Beginning Inventory - Production cost (1,200 units x $72) $ 86,400 Cost of Goods available for sale 86,400 Ending Inventory (400 units x $72) 28,800 57,600 Gross conttribution margin 54,400 Variable Selling and administrative expenses(800 units x $6) 4,800 Contribution Margin 49,600 Less: Fixed cost Manufacturing Overhead 24,000 Selling and administrative 12,000 36,000 Net Operating Income $ 18,400
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