Question

Zee Corporation was operating at 100% of capacity during its first month of operations with the...

Zee Corporation was operating at 100% of capacity during its first month of operations with the following results:

Sales (160 units)

$204,000

Production costs (200 units):

Direct materials

$100,000

Direct labor

60,000

Variable factory overhead

40,000

Fixed factory overhead

   1,000

201,000

Operating expenses:

Variable operating expenses

$ 12,000

Fixed operating expenses

   2,000

14,000

What is the amount of the manufacturing margin that would be reported on the variable costing income statement?

Select one:

a. $44,000

b. $4,000

c. $30,000

d. $38,800

Business   Accounting   
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Answer #1

The amount of the manufacturing margin that would be reported on the variable costing income statement is calculated below:

Cost Per Unit ($) (A) Total Units(B) $ (A*B)
Sale $204,000/160 Units =$1275 160   204,000
Less: Variable Cost
Direct Material $100,000/ 200 Units = $500   160   80,000
Direct Labor $ 60,000/200 Units = $300   160   48,000
Variable Factory Overheads $40,000/ 200 Units = $200 160   32,000
Manufacturing Margin $ 44,000

Manufacturing Margin = $ 44,000

So correct answer is option (a) or $44,000

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