Question

lbrege Corporation manufactures a single product. The company has supplied the following data:





Selling price per unit $ 30
Variable costs per unit:
Production $ 7
Selling and administrative $ 4
Fixed costs per year:
Production $ 75,000
Selling and administrative $ 50,000

There was no beginning inventory. During the year 25,000 units were produced and 20,000 units were sold.



The company's net operating income for the year under variable costing would be:

Answer 1

The company's net operating income for the year under variable costing would be: $255,000.

Net operating income

Sales $600,000

($20000×30)

Less : Cost Of Good Sold :  

Opening Inventory $0

Add : Cost of Good Manufactured $175,000

($25000×7)

Cost Of Good Available For Sale  $175,000

Less : Closing inventory  $35,000 $140,000

[($25000-$20000) × 7]

Gross Contribution margin  $460,000

Less : Variable Selling and administrative expense  $80,000

(20000×4)

Contribution Margin  $380,000

($460,000-$80,000)

Less: Fixed Production expense  $75,000

Less: Fixed Selling and administrative expense  $50,000

Net Operation income  $255,000

($380,000-$75,000-$75,000)

Therefore the company's net operating income for the year under variable costing would be: $255,000.

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