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 |