Tokless Inc.planned and manufactured 400,000 units of its single product in 2010,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 2010.Tokless Inc.sold 195,000 units of product in 2010 at $65 per unit.Variable costing operating income for 2010 is calculated to be:

Question

Quizplus · Accepted Answer

Variable costing operating income is calculated by subtracting variable costs and fixed costs from sales revenue. Sales revenue is 195,000 units * $65 = $12,675,000. Variable manufacturing costs are 195,000 units * $50 = $9,750,000. Fixed manufacturing costs are $800,000, and marketing and administrative costs are $600,000. Therefore, operating income = $12,675,000 - $9,750,000 - $800,000 - $600,000 = $1,525,000.