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Krepps Corporation produces a single product. Last year, Krepps manufactured 27,540 units and sold 22,200 units....

Krepps Corporation produces a single product. Last year, Krepps manufactured 27,540 units and sold 22,200 units. Production costs for the year were as follows:

Direct materials $ 214,812
Direct labor $ 121,176
Variable manufacturing overhead $ 239,598
Fixed manufacturing overhead $ 302,940

Sales totaled $1,098,900 for the year, variable selling and administrative expenses totaled $115,440, and fixed selling and administrative expenses totaled $176,256. There was no beginning inventory. Assume that direct labor is a variable cost.

Under variable costing, the company's net operating income for the year would be:

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Expert Solution

Ans. Unit product cost under Variable Costing:
Direct materials ($214,812 / 27,540) $7.80
Direct labor ($121,176 / 27,540) $4.40
Variable overhead ($239,598 / 27,540) $8.70
Total production cost per unit $20.90
KR E PPS CORPORATION
Variable costing (Contribution format) Income statement
Particulars Amount
Sales   $1,098,900
Less: Variable cost of goods sold:
Opening inventory $0
Add: Variable cost of goods manufactured (27540 * $20.90) $575,586
Variable cost of goods available for sale $575,586
Less: Ending inventory [(27540 - 22200)*$20.90] -$111,606
Variable cost of goods sold $463,980
Gross Contribution Margin $634,920
Less: Variable Selling and Adm. Exp.   $115,440
Contribution Margin $519,480
Less: Fixed expenses:
Fixed manufacturing overhead $302,940
Fixed selling and administrative expenses $176,256 $479,196
Net operating income    $40,284

ekkarill92 answered 4 months ago
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