3) A manufacturing company that produces a single product has provided the follo

Question

3) A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:

Selling Price $126

Units in beginning inventory: 0

Units produced: 3,100

Units sold: 3,000

Units in ending Inventory: 100

Variable costs per unit:

Direct materials: $22

Direct labor: $43

variable manufacturing overhead: $3

variable selling and admin: $10

Fixed costs:

fixed manufacturing overhead: $89,900 fixed selling and admin: $42,000

What is the net operating income for the month under variable costing?

$15,000

$12,100

$2,900

$5,300

Explanation / Answer

Under Variable Costing, Calculation has to be made only for Sold units only not required for produced units. In this fixed costs are treated as period costs which are not vary from units produced. Sales Revenue 126 Per Unit Less:-Variable Expense Direct Material 22 Per Unit Direct Labor 43 Per Unit VMOH 3 Per Unit VSAOH 10 Per Unit Contribution 48 No of units sold 3000 units Gross Contribution 144000 in $s Less:-Fixed Costs FMOH 89900 in $s FSAOH 42000 in $s Net Operating Income 12100 in $s Therfore Answer is B

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