Affinity makes a single product, pool pumps. Information for 2014 appears below (Assume the same unit costs in all years): $$\begin{array} { l r }
\text { Sales in units } & 5,800 \
\text { Production in units } & 6,200 \
\text { Beginning inventory } & 1,500 \
\text { Variable production cost per unit } & \$ 46.00 \
\text { Variable selling cost per unit } & \$ 6.00 \
\text { Fixed production cost per year } & \$ 31,000 \
\text { Fixed selling and administrative cost per year } & \$ 24,000 \
\text { Selling price per unit } & \$ 75.00
\end{array}$$ How much is net income for the year under variable costing?

Question

Affinity makes a single product, pool pumps. Information for 2014 appears below (Assume the same unit costs in all years): $$\begin{array} { l r } 
\text { Sales in units } & 5,800 \
\text { Production in units } & 6,200 \
\text { Beginning inventory } & 1,500 \
\text { Variable production cost per unit } & \$ 46.00 \
\text { Variable selling cost per unit } & \$ 6.00 \
\text { Fixed production cost per year } & \$ 31,000 \
\text { Fixed selling and administrative cost per year } & \$ 24,000 \
\text { Selling price per unit } & \$ 75.00
\end{array}$$ How much is net income for the year under variable costing?

Quizplus · Accepted Answer

Variable costing net income is calculated as follows:Sales revenue = 5,800 units * $75.00 = $435,000Variable costs = 5,800 units * ($46.00 + $6.00) = $294,800Contribution margin = $435,000 - $294,800 = $140,200Fixed costs = $31,000 + $24,000 = $55,000Net income = $140,200 - $55,000 = $85,200

Affinity Makes a Single Product, Pool Pumps How Much Is Net Income for the Year Under Variable