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Aquatic Pets Inc. makes 100-gallon plexiglass aquariums. They reported the following financial information for last year:...

Aquatic Pets Inc. makes 100-gallon plexiglass aquariums. They reported the following financial information for last year: Direct labor: 6,000 hours @ $20/hr Production manager salary: $50,000 Factory rent: $24,000 Equipment maintenance: $10,000 (considered a variable expense) Equipment depreciation: $10,000 Production for the year: 12,000 units Total Revenue: $1,000,000 Total aquariums sold during the period: 15,000 units Operating Income under absorption costing (after non-production expenses): $204,000 Assume that the fixed costs were the same on a per-unit basis during the prior period. What would Operating Income be under variable costing? (Round per-unit costs to the nearest cent.

Select one:

a. $180,51

0 b. $227,490

c. $183,000

d. $225,000

e. None of the above

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Answer #1
Total Fixed Manufacturing Overheads
Production manager salary 50000
factory rent 24000
Equipment depreciation 10000
Total Fixed Manufacturing Overheads 84000
Divide: Units produced 12000
Fixed Mfg oh per unit 7
Net Income under Absorption costing 204000
Add: Fixed Mfg oh released in beginning inventory (3000*7) 21000
Net Income as per Variable costing 225000
Answer is d. $ 225000
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