Question

Timmer Corporation just started business in January. There were no beginning inventories. During the year, it manufactured 11,100 units of product, and sold 8,700 units. The selling price of each unit was $28. Variable manufacturing costs were $4 per unit, and variable selling and administrative costs were $3 per unit. Fixed manufacturing costs were $22,200, and fixed selling and administrative costs were $7,600.

What would Timmer's net income be for the year using variable costing?

a.$152,900

b.$122,320

c.$182,700

d.$160,500

Answer 1

• All working forms part of the answer
• Income Statement – Variable Costing

A = 8700 units x $ 28	Sales revenue	$          243,600.00
	Variable Costs:
B = 8700 units x $ 4	Variable Manufacturing cost	$            34,800.00
C = 8700 units x $ 3	Variable Selling & Admin cost	$            26,100.00
D = B+C	Total Variable Cost	$            60,900.00
E = A - D	Contribution Margin	$          182,700.00
	Fixed Costs:
F	Fixed manufacturing cost	$            22,200.00
G	Fixed Selling & Admin cost	$              7,600.00
H = F+G	Total Fixed Cost	$            29,800.00
I = E - H	Net Income	$          152,900.00 = Answer

• Correct Answer = Option ‘A’ $ 152,900