In: Accounting
Hearables inc manufactures audio headsets.The varaible cost per headset is as follows:
| Direct material | $2.50 | 
| Direct labour | $1.75 | 
| Variable manufacturing overhead | $2.25 | 
| Sales commission | $0.75 | 
| Total variable cost per headset | $7.25 | 
Other costs are fixed and include selling costs of $75,000 per year administrative costs of $45,000 annually and fixed manufacturing overhead of $270,000 per year.There was no beginning work-in-process of finished goods inventory.During the past year, a total of 50,000 headsets were manufactured, and 45,000 headsets were sold at $25 each.
What would the operating profit be for the year under variable costing?
| 
 Working  | 
 Amount  | 
|
| 
 Sales  | 
 [45,000 units x $ 25]  | 
 $ 1,125,000.00  | 
| 
 Variable costs:  | 
||
| 
 Direct Material  | 
 [45,000 units x $ 2.50]  | 
 $ 112,500.00  | 
| 
 Direct Labor  | 
 [45,000 units x $ 1.75]  | 
 $ 78,750.00  | 
| 
 Variable Manufacturing Overhead  | 
 [45,000 units x $ 2.25]  | 
 $ 101,250.00  | 
| 
 Sales Commission  | 
 [45,000 units x $ 0.75]  | 
 $ 33,750.00  | 
| 
 Total Variable cost  | 
 $ 326,250.00  | 
|
| 
 Contribution margin  | 
 [45,000 units x $ (25 - 7.25)]  | 
 $ 798,750.00  | 
| 
 Fixed Costs:  | 
||
| 
 Selling costs  | 
 $ 75,000.00  | 
|
| 
 Administrative Costs  | 
 $ 45,000.00  | 
|
| 
 Fixed manufacturing Overheads  | 
 $ 270,000.00  | 
|
| 
 Total Fixed Costs  | 
 $ 390,000.00  | 
|
| 
 Net Operating Profits (under Variable costing)  | 
 $ 408,750.00  |