A business operated at 100% of capacity during its first month, with the followi

Question

A business operated at 100% of capacity during its first month, with the following results: Sales (120 units) Production costs (150 units): $600,000 Direct materials Direct labor Variable factory overhead Fixed factory overhead $75,000 18,750 33,750 30,000 157,500 Operating expenses: $6,260 Variable operating expenses Fixed operating expenses What is the amount of the income from operations that would be reported on the variable costing income statement? ) 4,230 10,490 a. $457,510 b. $599,850 C. $491,740 d. $589,510

Explanation / Answer

Total Units PU Sales 600000 120 5000 Production Costs: Production Costs: Direct Material 75000 150 500 Direct Material 500 Direct Labor 18750 150 125 Direct Labor 125 Variable FOH 33750 150 225 Variable FOH 225 Fixed FOH 30000 157500 150 200 Total Variable Cost 850 1050 Operating Expenses: Variable Operating Expense 6260 120 52.17 Fixed Operating Expense 4230 10490 Income Statement Under Variable Costing Sales (120*5000) 600000 Less: Variable Cost of Goods sold 102000 (120*850) Gross Contribution Margin 498000 Less: Variable Operating Expense 6260 (120*52.167) Contribution Margin 491740 Less: Period Expenses Fixed Manuafcturing OH 30000 Fixed Operating OH 4230 Total Period Expenses 34230 Net Operating Income 457510 Answer is 457510/-

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