Hahn Corporation Hahn Corporation produces a single product that sells for $7.00 per unit.Standard capacity is 100,000 units per year;100,000 units were produced and 80,000 units were sold during the year.Manufacturing costs and selling and administrative expenses are presented below. There were no variances from the standard variable costs.Any under- or overapplied overhead is written off directly at year-end as an adjustment to cost of goods sold.

Fixed costs Variable costs

Direct material $0 $1.50 per unit produced

Direct labor 0 1.00 per unit produced

Manufacturing overhead $150,000 0.50 per unit produced

Selling & Administration expense 80,000 0.50 per unit sold

Hahn Corporation had no inventory at the beginning of the year. Refer to Hahn Corporation.What is the net income under variable costing? A)$50,000 B)$80,000 C)$90,000 D)$120,000

Question

Hahn Corporation
Hahn Corporation produces a single product that sells for $7.00 per unit.Standard capacity is 100,000 units per year;100,000 units were produced and 80,000 units were sold during the year.Manufacturing costs and selling and administrative expenses are presented below.
There were no variances from the standard variable costs.Any under- or overapplied overhead is written off directly at year-end as an adjustment to cost of goods sold.

	Fixed costs	Variable costs
Direct material	$0	$1.50 per unit produced
Direct labor	0	1.00 per unit produced
Manufacturing overhead	$150,000	0.50 per unit produced
Selling & Administration expense	80,000	0.50 per unit sold

Hahn Corporation had no inventory at the beginning of the year. Refer to Hahn Corporation.What is the net income under variable costing? A)$50,000 B)$80,000 C)$90,000 D)$120,000

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 (80,000 units x $7) = $560,000. Variable costs include direct materials ($1.50 x 80,000), direct labor ($1.00 x 80,000), variable manufacturing overhead ($0.50 x 80,000), and variable selling and administrative expenses ($0.50 x 80,000), totaling $280,000. Contribution margin = $560,000 - $280,000 = $280,000. Fixed costs (manufacturing overhead $150,000 + selling and administrative $80,000) total $230,000. Net income = $280,000 - $230,000 = $50,000.

Hahn Corporation Hahn Corporation Produces a Single Product That Sells for $7.00