A business operated at 100% of capacity during its first month, with the following results: Sales (90 units) : $90,000 Production costs (100 units) : Direct materials$40,000 Direct labor20,000 Variable factory overhead2,000 Fixed factory overhead7,00069,000 Operating expenses: Variable operating expenses$8,000 Fixed operating expenses1,0009,000 The amount of contribution margin that would be reported on the variable costing income statement is a.$26,200 b.$29,700 c.$34,200 d.$20,200

The correct answer is C.

Explanation:

Giving the following information:

Sales (90 units) : $90,000

100 units:

Direct materials = $40,000

Direct labor = $20,000

Variable factory overhead = $2,000

Under the variable costing method, the unitary product cost is calculated using the direct material, direct labor, and variable overhead.

We need to calculate the unitary variable cost:

Unitary variable cost = total variable cost / number of units

Unitary variable cost = (40,000 + 20,000 + 2,000) / 100 = $620 per unit

Now, we can calculate the contribution margin:

Total contribution margin = total sales - total variable cot

Total contribution margin = 90,000 - 90*620 = $34,200