Question

Assume the following information for a company that produced 10,000 units and sold 8,000 units during its first year of operations and produced 8,000 units and sold 10,000 units during its second year of operations: Selling price Direct materials Direct labor Variable manufacturing overhead Sales commission Fixed selling and administrative expense Fixed manufacturing overhead Per Unt $200 $ 75 $ 50 $ 8 $ 8 Using variable costing, what is the net operating income for the second year of operations? Multiple Choice $150,000 $170,000

Answer 1

Computation of Net operating income for the second year of operation under using variable costing -

Income statement year1 Year2 a selling price 1600000 2000000 Cost of goods sold: Direct materials 750000 600000 Direct labor 500000 400000 variable manufacturing overhead 80000 64000 fixed manufacturing overhead 300000 300000 Total manufacturing cost 1630000 1364000 add opening FG 01 266000 less Closing FG 266000 0 0 b Cost of goods sold 1364000 1630000 с Gross Profit (a-b) 2360001 370000 64000 80000 d e Sales commission (unit sales*$ 8) fixed selling & admin expenses 110000 110000 f net income (c-d-e) 62000 180000

as per above computation the net operating income for 2nd year = $ 180000

so option (d) $ 180000 should be the correct option.

please check with your answer and let me know.