Butteco Corporation has provided the following cost data for last year when 100,
ID: 2398705 • Letter: B
Question
Butteco Corporation has provided the following cost data for last year when 100,000 units were produced and sold: Direct materials $200,000
Direct labor 100,000
Manufacturing overhead 200,000
Selling and administrative expense 150,000
All costs are variable except for $100,000 of manufacturing overhead and $80,000 of selling and administrative expense. There are no beginning or ending inventories. Selling price is $10 per unit. Compute net operating income from producing and selling 110,000 units.
Explanation / Answer
Sales (110,000*$10) $ 1,100,000 Less: Expenses Direct material ($200,000/100,000*110,000) $ 220,000 Direct labor ($100,000/100,000*110,000) $ 110,000 Variable manufacturing overhead (($200,000-$100,000)/100,000*110,000) $ 110,000 Fixed manufacturing overhead $ 100,000 Variable selling and administrative expense (($150,000-$80,000)/100,000*110,000) $ 77,000 Fixed selling and administrative expenses $ 80,000 Total expenses $ 697,000 Net operating income $ 403,000
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