a company sells and manufacturers one product. in the first year of operations,

Question

a company sells and manufacturers one product. in the first year of operations, variable costs pper unit is direct material $92. fixed costs per year is direct labor $720,000, fixed manufacturing overhead is $3,264,000, fixed selling and administrative $1,935,000. the company does not have any variable manufacturing overhead costs or variable selling and administrative costs. during the first year the company produced 48,000 units and sold 45,000. the companys only product sells for $258 per unit. what is the net operating income?

Explanation / Answer

Sales 45000 units * $ 258 per unit = $ 11,610,000

Direct material = 48000 units * $ 92 = $ 4,416,000

Operating Income = Revenue - direct material - labor - Fixed manufacturing OH - Fixed Selling & Administration

= $11,610,000 - $ 4,416,000 - $ 720,000 - $ 3,264,000 - $ 1,935,000

= $ 1,275,000

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