Question

THE Company provided the following cost information for last year when they produced and sold 120,000 units: direct materials direct labor manufacturing overhead selling and administrative expenses $200,000 100,000 180,000 150,000 All costs are variable except for $100,000 of the manufacturing overhead and $50,000 of the selling and administrative expenses. Assume the selling price is $10 per unit. The net income THE Company would report from producing and selling 150,000 units would be equal to: $712,500 O $735,000 $750,000 $826,500 $870,000 none of the above choices are correct

Answer 1

Requirement Net Income Determination of Variable Costs, Variable Costs per unit and Fixed Costs at 120,000 Units : Particulars Total Costs Variable Costs per Unit Fixed Costs Direct Material 200,000 200,000 1.67 Direct Labor 100,000 100,000 0.83 Manufacturing Overheads 180,000 80,000 0.67 100,000 Selling and Administrative Expenses 150,000 100,000 0.83 50,000 Sales Price 10.00 Determination of Net Income at 150,000 Units : Particulars per Unit Sales Price 10.00 Amount 1,500,000 Less : Variable Expenses Direct Materials Direct Labor Manufacturing Overheads Selling and Administrative Expenses Total Variable Expenses 1.67 0.83 0.67 0.83 4.00 250,000 125,000 100,000 125,000 600,000 Contribution Margin 6.00 900,000 Less : Fixed Expenses Manufacturing Overheads Selling and Administrative Expenses Total Fixed Expenses 100,000 50,000 150,000 Net Income 750,000 Therefore, the Answer is Option - C[$ 750,000]