Question

QUESTION 11

Eagle Corporation started business on January 1, 2017 and has provided you a list of standard costs associated with the manufacture and sale of one of its many products.

Description	Amount
Direct Material	$3.00 per unit
Direct Labor	$2.50 per unit
Variable Manufacturing Factory Overhead	$1.80 per unit
Fixed Manufacturing Factory Overhead	$4.00 per unit (Based on an Estimate of 50,000 units)*
Variable Selling Expenses	$.25 per unit
Fixed Selling, General and Administrative Expense	$75,000

*Recall total fix costs do not change within the relevant range. The relevant range for the production is 50,000 units. The company can produce up to 55,000 units however, it computed total fix cost based on 50,000 units.

The company produced 51,000 units and sold 48,000 units during its first year of operations. Each unit sold for $25.  

Compute Net Operating Income utilizing variable costing.

Answer 1

Calculation of unit product cost using variable costing

= direct materials per unit +direct labor per unit + variable mfg OH per unit

=$3.00 + 2.50 + 1.80

=$7.30

EAGLE CORPORATION

INOME STATEMENT USING VARIABLE COSTING

For the January 1, 2017

Sales $25*48000	$1,200,000
Variable cost of goods sold $7.30*48000	350,400
Variable selling expenses $ .25*48000	12000
CONTRIBUTION MARGIN	$837,600
Fixed costs$200,000+75000	275,000
NET OPERATING PROFIT	$562,600