Question

Ing Corporation, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price	$	159
Units in beginning inventory		0
Units produced		7,800
Units sold		7,700
Units in ending inventory		100

Variable costs per unit:
Direct materials	$	47
Direct labor	$	50
Variable manufacturing overhead	$	2
Variable selling and administrative expense	$	9
Fixed costs:
Fixed manufacturing overhead	$	304,200
Fixed selling and administrative expense	$	84,700

What is the net operating income for the month under variable costing?

Multiple Choice

• $3,800

• $(6,100)

• $3,900

• $7,700

Answer 1

Direct materials	47
Direct labor	50
Variable manufacturing overhead	2
Unit product cost $	99

Sales revenue (7700 x $159)		1224300
Less: Variable costs
Cost of goods sold (7700 x $99)	762300
Variable selling and administrative expense (7700 x $9)	69300	831600
Contribution margin		392700
Fixed costs:
Fixed manufacturing overhead	304200
Fixed selling and administrative expense	84700	388900
Net operating income $		3800

Answer: $3,800