Question

Hayes Company operated at normal capacity during the current year, producing 54814 units of its single...

Hayes Company operated at normal capacity during the current year, producing 54814 units of its single product. Sales totalled 45978 units at an average price of $24.62 per unit. Variable manufacturing costs were $11.80 per unit, and variable marketing costs were $4.92 per unit sold. Fixed costs were incurred uniformly throughout the year and amounted to $159038 for manufacturing and $54559 for marketing. There were no opening inventories.

What is Hayes operating income (loss) under direct (variable) costing?

Select one:

a. $149629

b. $184061

c. $175266

d. $45364

In the month just ended Nelson Industries produced 43267 units and sold 30087 units. There were 4724 units in finished goods inventory at the start of the month. Manufacturing costs are stable from month to month. The fixed overhead rate was $13 per unit. Nelson uses absorption costing. If Nelson changed to variable costing, the difference in net income would have been:

Select one:

a. $0

b. $171340

c. $232752

d. $61412

Homework Answers

Answer #1
Construct The Variable Costing Income Statement under FIFO
YEAR 1
Sales 1,131,978
Less: Variable cost
   variable cost of goods sold 542,540
   Variable selling expense 226,212 768,752
Contribution margin 363,226
Fixed expense:
   Fixed Manufacturing overheads 159,038
   Fixed selling expense 54,559
Net operating Income 149,629
Answer is a. $ 149629
Increase in Inventory units (43267-30087) 13,180
Fixed Mfg cost per unit 13
Difference in Income 171340
Answer is b. 171340
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