Knox Corporation manufactures an item. The cost structure is: Manufacturing Selling & Administrative Variable cost per...

Knox Corporation manufactures an item. The cost structure is:

Manufacturing Selling & Administrative

Variable cost per unit $100 $30

Total fixed cost $800,000 $203,000

In its first year of operations, Knox Corporation produced 70,000 items and sold 64,000 at $200 each.

Part 1: What is the contribution margin at the end of the first year of operations under the variable costing method?

Part 2: Which costing method (variable or absorption) will generate a higher net operating income in Knox Corporation’s first year of operations and by how much? Hint: See page 6-21 Illustration 6A-5 for Variable Costing model and page 6-20 Illustration 6A-4 for guidance on Absorption Costing model.

Expert Solution

ekkarill92 answered 1 year ago

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Knox Corporation manufactures an item. The cost structure is: Manufacturing Selling & Administrative Variable cost per...

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