Question

Keyser Corporation, which has only one product, has provided the following data concerning its most recent...

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

Selling price $ 125
Units in beginning inventory 850
Units produced 8,750
Units sold 8,850
Units in ending inventory 750
Variable costs per unit:
Direct materials $ 27
Direct labor $ 44
Variable manufacturing overhead $ 8
Variable selling and administrative expense $ 18
Fixed costs:
Fixed manufacturing overhead $ 70,000
Fixed selling and administrative expense $ 163,600

The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month.

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

Multiple Choice

  • $13,400

  • $14,200

  • $3,900

  • $22,100

Homework Answers

Answer #1

Sol:

Keyser Corporation
Absorption Costing Income Statement
Sales (8850*125) 1,106,250
Less: Cost of goods sold:
Direct materials (8850*27) 238,950
Direct labor (8850*44) 389,400
Variable manufacturing overhead (8850*8) 70,800
Fixed manufacturing overhead (70000/8750*8850) 70800
Total cost of goods sold (769,950)
Gross profit 336,300
Less: Selling and administrative expense
Variable (8850*18) 159300
Fixed 163,600
Total selling and administrative expense (322,900)
Net operating income (loss) 13,400
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