Question

A business operated at 100% of capacity during its first month, with the following results:

Sales (112 units)		$560,000
Production costs (140 units):
Direct materials	$70,000
Direct labor	17,500
Variable factory overhead	31,500
Fixed factory overhead	28,000	147,000
Operating expenses:
Variable operating expenses	$5,850
Fixed operating expenses	3,220	9,070

The amount of operating income that would be reported on the variable costing income statement is

a.$458,950

b.$550,930

c.$559,860

d.$427,730

Answer 1

Sales			$       560,000
Less:
Direct Materials			$         56,000
($70000/140*112)
Direct labor			$         14,000
($17500/140*112)
Variable factory overhead			$         25,200
(31500/140*112)
Fixed factory overhead			$         28,000
Variable operating expenses			$            5,850
Fixed operating expenses			$            3,220
Net Operating Income			$       427,730
Correct Option =d.$427730