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?
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:
|Construct The Variable Costing Income Statement under FIFO|
|Less: Variable cost|
|variable cost of goods sold||542,540|
|Variable selling expense||226,212||768,752|
|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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