Question

Keller Corporation, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price	$	157
Units in beginning inventory		1,250
Units produced		9,150
Units sold		9,250
Units in ending inventory		1,150

Variable costs per unit:
Direct materials	$	35
Direct labor	$	52
Variable manufacturing overhead	$	16
Variable selling and administrative expense	$	26
Fixed costs:
Fixed manufacturing overhead	$	73,200
Fixed selling and administrative expense	$	166,000

The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month.

What is the net operating income for the month under variable costing?

Answer 1

Net income as per Variable costing method = $19,800

Working

Keller Corporation
Variable costing income statement
Sales		$   1,452,250.00
Less: Variable costs
Direct material	$   323,750.00
Direct labor	$   481,000.00
Variable manufacturing overhead	$   148,000.00
Variable selling and administrative expense	$   240,500.00
Total Variable cost		$   1,193,250.00
Contribution margin		$     259,000.00
Less: Fixed Costs
Fixed selling and administrative expenses'	$   166,000.00
Fixed manufacturing overhead	$       73,200.00
Total Fixed Costs		$     239,200.00
Net Income		$         19,800.00