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14 August, 09:00

A company produces a single product. Last year, fixed manufacturing overhead was $30,000, variable production costs were $48,000, fixed selling and administration costs were $20,000, and variable selling administrative expenses were $9,600. There was no beginning inventory. During the year, 3,000 units were produced and 2,400 units were sold at a price of $40 per unit. Under variable costing, net operating income would be

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  1. 14 August, 11:37
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    Net operating income = (2,000)

    Explanation:

    Giving the following information:

    fixed manufacturing overhead was $30,000

    variable production costs were $48,000

    fixed selling and administration costs were $20,000

    variable selling administrative expenses were $9,600.

    During the year, 3,000 units were produced and 2,400 units were sold for $40 per unit.

    First, we need to calculate the unitary product variable cost:

    Unitary product cost = 48,000/3,000 = $16

    Income statement:

    Sales = 2,400*40 = 96,000

    Total variable cost = (2,400*16) + 9,600 = (48,000)

    Contribution margin = 48,000

    fixed manufacturing overhead = (30,000)

    fixed selling and administration costs were = (20,000)

    Net operating income = (2,000)
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