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 1 month ago

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