Franz began business at the start of this year and had the following costs: variable manufacturing cost per unit, $9; fixed manufacturing costs, $60,000; variable selling and administrative costs per unit, $2; and fixed selling and administrative costs, $220,000. The company sells its units for $45 each. Additional data follow. $\begin{array}{lr}
\text { Planned production in units } & 10,000 \
\text { Actual production in units } & 10,000 \
\text { Number of units sold } & 8,500
\end{array}$ There were no variances.
The income (loss) under variable costing is:
A) $(7,500).
B) $9,000.
C) $15,000.
D) $18,000.
E) None of the other answers are correct.

Question

Quizplus · Accepted Answer

Under variable costing, the income is calculated by subtracting total variable costs and fixed costs from total sales revenue. The contribution margin per unit is $45 - $9 - $2 = $34. Total contribution margin for 8,500 units sold is $34 * 8,500 = $289,000. Subtracting total fixed costs ($60,000 + $220,000 = $280,000) from the contribution margin gives an income of $9,000.

Franz Began Business at the Start of This Year and Had