Question

Freshmart, Inc., began the year with 250 units of inventory at a cost of $55 per unit using variable costing, produced 1,000 units, and sold 1,250 units at a selling price of $100 per unit. Fixed overhead costs totaled $30,000 and fixed selling and administrative expenses were $15,000. Variable production costs were $25.00 per unit while variable selling and administrative expenses were $10.00 per unit. Using variable costing, net income was:

Answer 1

Answer:

The net income will be "$36,250".

Explanation:

The given values are:

Administrative expenses

= $15,000

Fixed overhead costs

= $30,000

According to the question:

The sales will be:

=  $1250 \ units\times 100 \ per \ units$

=  $125000$

The production cost of the variable will be:

=  $1250 \ units \times 25 \ per \ units$

=  $31250$

Variable selling will be:

=  $1250 \ units\times 10 \ per \ units$

=  $12500$

The net income will be:

⇒  $Sales-Production \ cost \ of \ variable-admin \ expenses-fixed \ costs-fixed \ selling$

On substituting the values, we get

⇒  $125000-31250-12500-30000-15000$

⇒  $36250$ ($)