WebFlicks is an online DVD company that produces its own DVD copies of first-run movies that it sells for $8.00 each.The following information is available (Assume the same unit costs in all years): $\begin{array}{ll}\text { Variable costs: }\
\text { Product royalty fees } & \$ 3.30 \text { per DVD } \
\text { DVD production } & \$ 1.20 \text { per DVD } \
\text { Selling and admin costs } & \$ 0.80 \text { per DVD }\\text { Fixed costs: }\\text { Production }&\$ 128,000 \text { per month }\
\text { Selling and administration }&\$ 130,000 \text { per month }\
\end{array}$ During June, 160,000 DVDs were produced and 144,000 were sold.There were 17,000 DVDs in beginning inventory.How much is net income per month under full costing?
A)$143,600
B)$130,640
C)$130,800
D)None of these answer choices are correct.

Question

Quizplus · Accepted Answer

Net income is sales revenue minus total costs. Sales revenue is the number of units sold times the selling price per unit. Total costs are the sum of variable costs and fixed costs. Variable costs are the sum of product royalty fees, DVD production, and selling and admin costs. Fixed costs are the sum of production and selling and administration costs.In this case, the number of units sold is 144,000, the selling price per unit is $8.00, the product royalty fees are $3.30 per DVD, the DVD production cost is $1.20 per DVD, the selling and admin costs are $0.80 per DVD, the production fixed costs are $128,000 per month, and the selling and administration fixed costs are $130,000 per month.Therefore, the sales revenue is 144,000 * $8.00 = $1,152,000. The variable costs are 144,000 * ($3.30 + $1.20 + $0.80) = $729,600. The fixed costs are $128,000 + $130,000 = $258,000. Therefore, the total costs are $729,600 + $258,000 = $987,600. Therefore, the net income is $1,152,000 - $987,600 = $164,400.

WebFlicks Is an Online DVD Company That Produces Its Own