Question

A business operated at 100% of capacity during its first month and incurred the following costs:

Production costs (18,100 units):
Direct materials	$171,800
Direct labor	220,400
Variable factory overhead	256,100
Fixed factory overhead	102,000	$750,300
Operating expenses:
Variable operating expenses	$128,600
Fixed operating expenses	43,000	171,600

If 1,600 units remain unsold at the end of the month and sales total $1,143,000 for the month, what would be the amount of income from operations reported on the variable costing income statement?

a.$278,370

b.$81,494

c.$57,308

d.$66,325

Answer 1

ANS.	Option A   $278,370
	Variable Costing Income Statement
	PARTICULARS		Amount
	Sales		$1,143,000
	Less: Variable Cost of goods sold	$591,030
	Less: Variable selling and administrative expenses	128600
	Total variable costs		$719,630
	Contribution margin		$423,370
	Fixed costs:
	Fixed manufacturing costs	$102,000
	Fixed selling and administrative expenses	$43,000
	Total fixed costs		$145,000
	Operating income		$278,370
	*WORKING NOTES :
	*Calculations for cost of goods manufactured:
	Direct materials	$171,800
	Direct labor	$220,400
	Variable factory overhead	$256,100
	Total variable cost of goods manufactured	$648,300
	Unit product cost = Total variable cost of goods manufactured / Units manufactured
	$648,300 / 18,100
	$35.82	per unit
	Units sold = Units produced - Ending inventory units
	18,100 - 1,600
	16500
	*Variable cost of goods sold = Units sold * Unit product cost
	16,500 * $35.82
	$591,030