A business operated at 100% of capacity during its first month and incurred the

Question

A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (10,000 units): Direct materials $140,000 Direct labor 40,000 Variable factory overhead 20,000 Fixed factory overhead 4,000 $204,000 Operating expenses: Variable operating expenses $ 34,000 Fixed operating expenses 2,000 36,000 If 2,000 units remain unsold at the end of the month and sales total $300,000 for the month, what would be the amount of income from operations reported on the variable costing income statement? A. $100,800 B. $100,000 C. $114,800 D. $140,000

Explanation / Answer

Particulars No. of units Value $ Sales 8000 300000 Direct Material -112000 140,000 X 8,000 units sold/10,000 units produced Direct Labour Costs -32000 40,000 X 8,000 units sold/10,000 units produced Variable Factory Overheads -16000 20,000 X 8,000 units sold/10,000 units produced Variable Operating Expenses -27200 34,000 X 8,000 units sold/10,000 units produced 112800 Fixed Operating Expenses -2000 Net Income 110800

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