Question

Mandolin produced 70,000 units and sold 50,000 units. Their unit selling price is $20 and they have variable unit production costs of $10, variable selling expenses of $3 and fixed overhead of $10,000. Compute Mandolin's net income under variable costing.

Answer 1

Answer:

Explanation:

The computation of the net income under variable costing is presented below:

Sales (50,000 × $20) $1,000,000

Less: Variable production cost (70,000 × $10) -$700,000

Cost of goods available for sale  $700,000

Less: Ending inventory (20,000 × $10)   -$200,000

Cost of goods sold  -$500,000

Gross contribution margin $500,000

Less: Variable Selling and administrative expenses (50,000 × 3) $150,000

Contribution margin $350,000

Less: Fixed overhead $10,000

Net income $40,000