Tokless Inc. planned and manufactured 400,000 units of its single product in 2019, its first year of operations. Variable manufacturing costs were $50 per unit of production. Planned and fixed manufacturing costs were $800,000. Marketing and administrative costs (all fixed) were $600,000 in 2019. Tokless Inc. sold 195,000 units of product in 2019 at $65 per unit.

Variable costing operating income for 2019 is calculated to be:

Question

Variable costing operating income for 2019 is calculated to be:

Quizplus · Accepted Answer

Variable costing operating income is calculated as: (Sales - Variable Costs - Fixed Costs). Sales = 195,000 units * $65 = $12,675,000. Variable Costs = 195,000 units * $50 = $9,750,000. Fixed Costs = $800,000 (manufacturing) + $600,000 (marketing/admin) = $1,400,000. Operating Income = $12,675,000 - $9,750,000 - $1,400,000 = $1,525,000.