Question

Farris Corporation, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price	$	160
Units in beginning inventory		0
Units produced		9,550
Units sold		9,150
Units in ending inventory		400

Variable costs per unit:
Direct materials	$	30
Direct labor	$	72
Variable manufacturing overhead	$	18
Variable selling and administrative expense	$	22
Fixed costs:
Fixed manufacturing overhead	$	143,250
Fixed selling and administrative expense	$	10,000

What is the net operating income (loss) for the month under variable costing?

Brewer 8e Rechecks 2018-06-22

Multiple Choice

$(36,550)

$17,450

$11,450

$6,000

Answer 1

• Prepare the Contribution margin Income Statement for the answer

Sales revenue	[9150 units sold x $ 160]	$     1,464,000.00
Variable costs:
Direct Material	[9150 units sold x $ 30]	$        274,500.00
Direct Labor	[9150 units sold x $ 72]	$        658,800.00
Manufacturing Overhead	[9150 units sold x $ 18]	$        164,700.00
Selling & Admin expenses	[9150 units sold x $ 22]	$        201,300.00
Total variable cost		$     1,299,300.00
Contribution margin		$        164,700.00
Fixed Costs:
Manufacturing Overhead	$          143,250.00
Selling & Admin expenses	$            10,000.00
Total Fixed Cost		$        153,250.00
Net Operating Income (Loss)		$           11,450.00 = Answer

• Correct Answer = Option #3: $ 11,450