The company's net operating income for the year under variable costing would be: $255,000.
<h3>Net operating income</h3>
Sales $600,000
($20000×30)
Less : Cost Of Good Sold :
Opening Inventory $0
Add : Cost of Good Manufactured $175,000
($25000×7)
Cost Of Good Available For Sale $175,000
Less : Closing inventory $35,000 $140,000
[($25000-$20000) × 7]
Gross Contribution margin $460,000
Less : Variable Selling and administrative expense $80,000
(20000×4)
Contribution Margin $380,000
($460,000-$80,000)
Less: Fixed Production expense $75,000
Less: Fixed Selling and administrative expense $50,000
Net Operation income $255,000
($380,000-$75,000-$75,000)
Therefore the company's net operating income for the year under variable costing would be: $255,000.
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