Tyson Manufacturing
Tyson Manufacturing has the following cost information available for 2009:
$\begin{array}{lr}
\text { Direct materials } & \$ 6.00 \text { per unit } \
\text { Direct labour } & \$ 2.00 \text { per unit } \
\text { Variable manufacturing overhead } & \$ 1.50 \text { per unit } \
\text { Variable selling and administrative costs } & \$ 3.00 \text { per unit } \
\text { Fixed manufacturing overhead } & \$ 40000 \
\text { Fixed selling and administrative costs } & \$ 50000
\end{array}$
During 2009, Tyson produced 10 000 units out of which 9100 units were sold for $50 each.
-What is net income under variable costing?

Question

Tyson Manufacturing
Tyson Manufacturing has the following cost information available for 2009:
$\begin{array}{lr}
\text { Direct materials } & \$ 6.00 \text { per unit } \
\text { Direct labour } & \$ 2.00 \text { per unit } \
\text { Variable manufacturing overhead } & \$ 1.50 \text { per unit } \
\text { Variable selling and administrative costs } & \$ 3.00 \text { per unit } \
\text { Fixed manufacturing overhead } & \$ 40000 \
\text { Fixed selling and administrative costs } & \$ 50000
\end{array}$ 
During 2009, Tyson produced 10 000 units out of which 9100 units were sold for $50 each.
-What is net income under variable costing?

Quizplus · Accepted Answer

Under variable costing, only variable costs are considered in calculating the cost of goods sold. The variable cost per unit is $6 (materials) + $2 (labour) + $1.50 (manufacturing overhead) = $9.50. Total variable cost for 9100 units sold is 9100 * $9.50 = $86,450. Total variable selling and administrative costs are 9100 * $3 = $27,300. Total fixed costs are $40,000 (manufacturing) + $50,000 (selling and administrative) = $90,000. Total revenue is 9100 * $50 = $455,000. Net income = Total revenue - Total variable costs - Total fixed costs = $455,000 - $86,450 - $27,300 - $90,000 = $251,250.

Tyson Manufacturing Tyson Manufacturing Has the Following Cost Information Available

Tyson Manufacturing
Tyson Manufacturing Has the Following Cost Information Available