Question

Kevin company manufactures and sells one product. The following information pertains to the company's first year of operations:

Selling price per unit	$100
Variable costs per unit:
Manufacturing:
Direct materials	$8
Direct labor	$20
Variable manufacturing overhead	$11
Variable selling and administrative expense	$18
Fixed costs per year:
Fixed manufacturing overhead	$48,000
Selling and administrative expense	$75,700

Production	6,000 units
Sales	4,500 units

Q.: What is net operating income under variable costing in the first year?

Answer 1

Particulars	Amount	Amount
Sales (4500 units * $100)		$ 4,50,000
Less: Variable costs
Direct material ( 4500 *$8)	$       36,000
Direct Labor (4500*$20)	$       90,000
Manufacturing overhead (4500*$11)	$       49,500
Selling & administrative overhead (4500*$18)	$       81,000	$ 2,56,500
Contribution		$ 1,93,500
Less: Fixed costs
Manufacturing overhead	$       48,000
Selling & Administrative expenses	$       75,700	$ 1,23,700
Net Operating Income		$ 69,800