Question

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:
Units-beginning inventory................. 0
Units produced................................... 6,700
Units sold........................................... 6,500
Units-ending inventory..................... 200
Variable costs per unit
Direct materials................................ $47
Direct labor..................................... 44
Variable manufacturing OH........... 6
Variable selling and administrative expense $11
Fixed costs:
Fixed manufacturing overhead $52,500
Fixed selling and administrative expenses $3,800

What is the net operating income for the month under variable costing?

Answer 1

Answer:

Hi, your question is missing the selling price per unit, however important principles and calculations are explained below:

Variable Cost Product Costs = Only Variable Manufacturing Costs

Variable Cost Period Costs  = Fixed Manufacturing Costs + All Non Manufacturing Costs.

Product Cost per unit  = $47 + $44 + $ 6

                                     = $97.00

Calculation of net operating income for the month under variable costing

Sales ($pp × 6,500)                                                                             xxxxx

Less Costs of Sales

Opening Stock of Finished Goods 0                                   0

Add Cost of Goods Manufactured ($97.00×6,700)    $649,900

Less Closing Stock of Finished Goods ($97.00×200)  ($19,400) $630,500

Contribution                                                                                        xxxxx

Less Expenses

Fixed manufacturing overhead                                                      ($52,500 )

Fixed selling and administrative expenses                                    ($3,800)

Variable selling and administrative expense                               ($11×6,700)

Net Income/(Loss)                                                                              xxxxx

Explanation: