Wind Fall, a manufacturer of leaf blowers, began operations this year. During th

Question

Wind Fall, a manufacturer of leaf blowers, began operations this year. During this year, the company produced 10,000 leaf blowers and sold 8,500. At year-end the company reported the following income statement using absorption costing:

Production costs per leaf blower total $20, which consists of $16 in variable production costs and $4 in fixed production costs (based on the 10,000 units produced). Fifteen percent of total selling and administrative expenses are variable. Compute net income under variable costing.

The anwser is $146,500

Please explain why

Sales (8,500 × $45) $382,500 Cost of goods sold (8,500 × $20) 170,000 Gross margin $212,500 Selling and administrative expenses     60,000 Net income $152,500

Explanation / Answer

Wind Fall

Variable Costing Statement

Particulars Amount ( In $) Sales (8500 × $45) 382500 Less: Variable C.O.G.S. (8500 × $16) 136000 Less: Variable Selling & Administrative Overheads (60000 × 15%) 9000 Contributions 237500 Less: Fixed Selling & Administrative Overheads (60000 × 85%) 51000 Less: Fixed Production Cost (10000 × $4) 40000 Net Income 146500

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.