Question

Alvin Inc. planned and actually manufactured 200,000 units of its single product in 2014, its first year of operations. Variable manufacturing costs were $30 per unit of product produced. Planned and actual fixed manufacturing costs were $600,000, and fixed marketing and administrative costs totaled $400,000 in 2014. Alvin sold 120,000 units of product in 2014 at a selling price of $40 per unit. What is Alvin's 2014 operating income using variable costing?

Answer 1

Answer:

operating income    $200,000  

Explanation:

                                                                                                      $  

Revenue                          (40×120,000)                           4,800,000

less: Variable manufacturing cost  ($30×120,000)       (3,600,000 )

Contribution                                                                      1,200,000.

Less fixed cost:

Manufacturing                                                                     ( 600,000)

Marketing                                                                           (400,000)

operating income                                                                200,000

Operating income    $200,000