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Corporation has provided the following cost data for last year when 100,000 units were produced Raw...

Corporation has provided the following cost data for last year when 100,000 units were produced

Raw materials: $200,000

Direct Labor: $100,000

Manufacturing Overhead: $200,000

Sell & Admin Expense: $150,000

All costs are variable except for $100,000 of manufacturing overhead and $100,000 sell & admin expense. There are no beginning or ending inventories.

If the selling price is $10 per unit, the net operation income from producing and selling 110,000 units would be:

A) $560,000

B) $385,000

C) $405,000

D) $450,000

Solutions

Expert Solution

C) $405,000

Step-1:Calculation of variable cost per unit at 100,000 units
Total variable costs Total units Variable Cost per unit
a b c=a/b
Raw materials $        2,00,000        1,00,000 $       2.00
Direct Labor $        1,00,000        1,00,000 $       1.00
Manufacturing Overhead $        1,00,000        1,00,000 $       1.00
Sell & Admin Expense $            50,000        1,00,000 $       0.50
Note:
Variable cost per unit remains same and fixed costs in total remains same.
Step-2:Calculation of net operation income from producing and selling 110,000 units
Per Unit Total
Sales $    10.00 $       11,00,000
Variable costs:
Raw materials $       2.00 $          2,20,000
Direct Labor $       1.00 $          1,10,000
Manufacturing Overhead $       1.00 $          1,10,000
Sell & Admin Expense $       0.50 $             55,000
Contribution Margin $       5.50 $          6,05,000
Fixed Costs:
Manufacturing Overhead $          1,00,000
Sell & Admin Expense $          1,00,000
Net Operation income $          4,05,000

jeff jeffy answered 1 year ago
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