Bethel,Inc.has collected the following data.(There are no beginning inventories.) $$\begin{array} { | l | r | c | }
\hline \text { Units produced } & 600 & \text { units } \
\hline \text { Sales price } & \$ 120 & \text { per unit } \
\hline \text { Direct materials } & \$ 10 & \text { per unit } \
\hline \text { Direct labor } & \$ 10 & \text { per unit } \
\hline \text { Variable manufacturing overhead } & \$ 7 & \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 16,400 & \text { per year } \
\hline \text { Variable selling and administrative costs } & \$ 7 & \text { per unit } \
\hline \text { Fixed selling and administrative costs } & \$ 11,700 & \text { per year } \
\hline
\end{array}$$ What is the operating income using variable costing if 500 units are sold?

Question

Bethel,Inc.has collected the following data.(There are no beginning inventories.) $$\begin{array} { | l | r | c | } 
\hline \text { Units produced } & 600 & \text { units } \
\hline \text { Sales price } & \$ 120 & \text { per unit } \
\hline \text { Direct materials } & \$ 10 & \text { per unit } \
\hline \text { Direct labor } & \$ 10 & \text { per unit } \
\hline \text { Variable manufacturing overhead } & \$ 7 & \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 16,400 & \text { per year } \
\hline \text { Variable selling and administrative costs } & \$ 7 & \text { per unit } \
\hline \text { Fixed selling and administrative costs } & \$ 11,700 & \text { per year } \
\hline
\end{array}$$ What is the operating income using variable costing if 500 units are sold?

Quizplus · Accepted Answer

Under variable costing, only variable costs are considered in calculating the cost of goods sold. The contribution margin is calculated as follows: Sales (500 units x $120) - Variable Costs (500 units x ($10 + $10 + $7 + $7)) = $60,000 - $17,000 = $43,000. Subtract fixed costs ($16,400 + $11,700) from the contribution margin to get the operating income: $43,000 - $28,100 = $14,900.

Bethel,Inc What Is the Operating Income Using Variable Costing If 500