Question

Reese’s Corporation manufactures bags of chocolate and peanut butter candies shipped on special pallets to keep them at a constant temperature. The company’s actual and static budgeted volume was 200,000 pallets of product in its first year of operations. Variable manufacturing costs were $55 per pallet of product. Actual and static budget fixed manufacturing costs were $3,400,000, and selling and general costs were $1,000,000. Reese’s sold 210,000 pallets that year for $80 per pallet. Reese’s variable costing operating income is ________.

$800,000

$5,250,000

$1,850,000

$850,000

Answer 1

Sales revenue	16800000	=210000*80
Less: Cost of goods sold	11550000	=210000*55
Less: Fixed manufacturing costs	3400000
Less: Selling and general costs	1000000
Variable costing operating income	850000
Option D $850,000 is correct