During its first year of operations,Carlos Manufacturing Corporation incurred the following costs to produce 8,000 units of its only product: The company also incurred the following costs in selling 7,500 units of product during its first year: Assume that direct labor is a variable cost. If Carlos' absorption costing net operating income for this first year is $118,125,what would its variable costing net operating income be for this first year?
A)$86,000
B)$90,000
C)$104,125
D)$146,250

Question

During its first year of operations,Carlos Manufacturing Corporation incurred the following costs to produce 8,000 units of its only product:  The company also incurred the following costs in selling 7,500 units of product during its first year:  Assume that direct labor is a variable cost. If Carlos' absorption costing net operating income for this first year is $118,125,what would its variable costing net operating income be for this first year?
A)$86,000 
B)$90,000 
C)$104,125 
D)$146,250

Quizplus · Accepted Answer

Fixed manufacturing overhead per unit = $450,000 ÷ 8,000 units produced = $56.25 per unit
Units in ending inventory = Units in beginning inventory + Units produced - Units sold
= 0 units + 8,000 units - 7,500 units = 500 units
Manufacturing overhead deferred in (released from)inventory = Fixed manufacturing overhead in ending inventory - Fixed manufacturing overhead in beginning inventory = ($56.25 per unit × 500 units)- $0 = $28,125
 11eaa3fe_32c2_0cea_908b_15153c99e643_TB2461_00 Variable costing net operating income + $28,125 = $118,125
Variable costing net operating income = $118,125 - $28,125 = $90,000

During Its First Year of Operations,Carlos Manufacturing Corporation Incurred the Following