DeAnne Company produces a single product. The company\'s variable costing income

Question

DeAnne Company produces a single product. The company's variable costing income statement for the month August appears below:

The company produced 35,680 units in August and the beginning inventory consisted of 8,820 units. Variable production costs per unit and total fixed costs have remained constant over the past several months.

Under absorption costing, for August the company would report a:

$16,040 loss

$40,100 profit

$71,360 profit

$16,040 profit

De Anne Company
Income Statement
For the month ending August 31   Sales ($17 per unit) $742,900   Variable expenses:   Variable cost of goods sold 393,300   Variable selling expense 131,100   Total variable expenses 524,400   Contribution margin 218,500   Fixed expenses:   Fixed manufacturing 107,040   Fixed selling and administrative 71,360   Total fixed expenses 178,400   Net operating income $ 40,100

Explanation / Answer

Under absorption costing, for August the company would report a: ($40100 - 0) = $40100

De Anne Company
Income Statement
For the month ending August 31   Sales 35680units@$17 per unit $606560   Variable expenses:   Variable cost of goods sold(39300/43700x35680) 321120   Variable selling expense(131100/43700x35680) 107040   Total variable expenses 428160   Contribution margin 178400   Fixed expenses:   Fixed manufacturing 107040   Fixed selling and administrative 71,360   Total fixed expenses 178,400   Net operating income $ 0

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