Question

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

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