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13 March, 16:45

Jones Company incurred the following costs while producing 100 chairs: Units produced 100 chairs Direct materials $10 per unit Direct labor 15 per unit Variable manufacturing overhead 3 per unit Total fixed manufacturing overhead 2,000 Variable selling and administrative 4 per unit Fixed selling and administrative 3,000 What is operating income using variable costing if 90 units were sold for $150 each?

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  1. 13 March, 17:07
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    Operating Income under Variable Costing = $5,620

    Explanation:

    Jones Company

    Variable costing income statement

    For the month of June 30, 20YY

    Sales (90 units * $150) $13,500

    Less: Variable expenses

    Direct materials (90 units * $10) = $900

    Direct labor (90 units * $15) = $1,350

    Variable manufacturing overhead (90 units * $3) = $270

    Total variable expenses ($2,520)

    Variable manufacturing margin $10,980

    Less: Variable selling and administrative (90*$4) $360

    Contribution Margin $10,620

    Less: Fixed Expenses

    Manufacturing overhead $2,000

    Selling and administrative $3,000

    Total fixed expenses $ (5,000)

    Net Operating Income = $5,620
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