Swan Textiles Inc. produces and sells a decorative pillow for $98.00 per unit. In the first month of operation, 2,200 units were produced and 1,800 units were sold. Actual fixed costs are the same as the amount budgeted for the month. Other information for the month includes:

Variable manufacturing costs ... $23

Variable marketing costs ... $6

Fixed manufacturing costs ... $13

Administrative expenses, all fixed ... $19.5

Ending inventories:

Direct materials ... 0

WIP ... 0

Finished goods ... 450units

What is the ooeratina income usina variable costing?

a. $59,750

b. $74,375

c. $131,250

d. $108,500

Net operating income = 60,500

Explanation:

Giving the following information:

Variable manufacturing costs ... $23

Variable marketing costs ... $6

Fixed manufacturing costs ... $13

Administrative expenses, all fixed ... $19.5

Under the variable costing method, the unitary product cost is calculated using only the manufacturing costs.

First, we need to calculate the total fixed costs:

Fixed manufacturing costs = 2,200*13 = 28,600

Fixed administrative expense = 1,800*19.5 = 35,100

Total unitary variable cost = 23 + 6 = 29

Now, we can calculate the income statement:

Sales = 1,800*98 = 176,400

Variable cost = 1,800 * 29 = (52,200)

Contribution margin = 124,200

Fixed manufacturing costs = (28,600)

Fixed administrative expense = (35,100)

Net operating income = 60,500