Answer: Option (a) $146,500 is correct.
Explanation:
Company produced = 10,000 leaf blowers
Company produced sold = 8,500 leaf blowers
Income statement of year-end:
Sales = $ 382,500
Cost of goods sold = 170,000
Gross margin = $ 212,500
Selling and administrative expenses = 60000
Net income = $ 152,500
Production costs per leaf blower total = $20
Variable cost of goods sold = 8500 × $16 = $136000
Variable selling and administrative expenses = 15% of 60000 = $9000
Fixed production Cost = 10000 × $4 = 40000
Fixed Selling & Administrative expenses = (100% - 15%) of 60000 = $51000
∴ Net income under variable costing = sales - Variable cost of goods sold - Variable selling and administrative expenses - Fixed production Cost - Fixed Selling & Administrative expenses
= 382,500 - 136000 - 9000 - 40000 - 51000
= 146500
