Price Company sells 100000 units for $13 a unit. Fixed costs are $350000 and net income is $250000. What should be reported as variable expenses in the CVP income statement?

Question

Quizplus · Accepted Answer

First, we need to calculate the total revenue:
Total revenue = 100,000 units x $13 per unit = $1,300,000
Next, we need to calculate the total contribution margin, which is the difference between the total revenue and the total variable expenses:
Total contribution margin = Total revenue - Total variable expenses
We can rearrange this equation to solve for the total variable expenses:
Total variable expenses = Total revenue - Total contribution margin
We know that the total fixed costs are $350,000 and the net income is $250,000, so we can use the following formula to calculate the total contribution margin:
Total contribution margin = Net income + Total fixed costs
Total contribution margin = $250,000 + $350,000
Total contribution margin = $600,000
Now we can use this value to calculate the total variable expenses:
Total variable expenses = Total revenue - Total contribution margin
Total variable expenses = $1,300,000 - $600,000
Total variable expenses = $700,000
Therefore, the answer is B - $700,000 should be reported as variable expenses in the CVP income statement.

Price Company Sells 100000 Units for $13 a Unit