Question

Cournot Company sells 100,000 wrenches for $12 a unit. Fixed costs are $300,000, and net income is $200,000. What should be reported as variable expenses in the CVP income statement?

Answer 1

Answer:

$ 700,000

Explanation:

Data provided:

Total units sold = 100,000

cost per unit of wrench = $ 12 / unit

Fixed cost = $300,000

The net income for the company = $200,000

Now,

the total selling cost of the units sold = units sold × cost per unit

or

the total selling cost of the units sold = 100,000 × $ 12 = $ 1,200,000

also

Selling cost = Fixed cost + Variable cost + Net income

thus,

Variable cost = Selling cost - (Fixed cost + Net income)

on substituting the values, we have

Variable cost = $ 1,200,000 - ($300,000 + $200,000) = $ 700,000