Question

Tustin Corporation has provided the following data for its two most recent years of operation:

Selling price per unit	$	68
Manufacturing costs:
Variable manufacturing cost per unit produced:
Direct materials	$	10
Direct labor	$	6
Variable manufacturing overhead	$	4
Fixed manufacturing overhead per year	$	220,000
Selling and administrative expenses:
Variable selling and administrative expense per unit sold	$	6
Fixed selling and administrative expense per year	$	61,000

	Year 1	Year 2
Units in beginning inventory	0	1,000
Units produced during the year	11,000	10,000
Units sold during the year	10,000	7,000
Units in ending inventory	1,000	4,000

The net operating income (loss) under variable costing in Year 1 is closest to:

Multiple Choice

• $480,000

• $139,000

• $420,000

• $159,000

Answer 1

Here answer is $139000

Calculated as

Tustin Corporation
Contribution Margin Income Statement for 1st year
	Amount
Revenue =10000*68 =	$       680,000
Less: Variable Expense
Direct Material = 10000*10=	$       100,000
Direct Labor= 10000*6	$         60,000
Variable manufacturing overhead = 10000*4	$         40,000
Variable selling and administrative expense = 10000*6	$         60,000
Contribution	$       420,000
Less: Fixed Costs
Fixed Manufacturing overhead	$       220,000
Fixed selling and administrative overhead	$         61,000
Net Income	$       139,000

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