Question

A company’s first year of operation resulted in the following:

Variable costs per unit:
Direct materials	$	85
Fixed costs per year:
Direct labor	$	420,000
Fixed manufacturing overhead	$	1,550,000
Fixed selling and administrative expenses	$	470,000

The company incurs no other expenses other than those listed above. Related to the operating data above, the company produced 24,000 units and sold 16,000 units. The selling price for the company’s product $230 per unit.

The net operating income (loss) for the year under super-variable costing is:

Answer 1

Operating income as per variable costing
sales (16000 units *$230)	$          36,80,000
Less:
Direct Materials ($85*16000)	$          13,60,000
Contribution margin	$          23,20,000
Less:
Fixed cost
Direct labor	$            4,20,000
Fixed manufacturing overhead	$          15,50,000
Fixed selling and administrative expenses	$            4,70,000
Operating loss	$ (1,20,000)