Eastwood Company has the following information for the current year:
$\begin{array}{llcc}
\text { Selling price } & \text { \$ 150 per unit } \
\text { Variable production costs} & \text { \$ 40 per unit producer } \
\text { Variable selling and admin. expenses} & \text { \$ 16 per unit sold } \
\text { Fixed production costs } & \text { \$ 200,000 } \
\text { Fixed selling and admin. expenses } & \text {\$ 140,000 } \
\text { Units produced} & \text { 10,000 units} \
\text {Units sold } & \text { 8.000 units } \
\end{array}$
There were no beginning inventories.
-Refer to the figure.What is the net income for Eastwood using the variable costing method?

Question

Eastwood Company has the following information for the current year:
$\begin{array}{llcc}
  \text { Selling price } &  \text { \$ 150 per unit } \
  \text {  Variable production costs} &  \text {  \$ 40 per unit producer } \ 
  \text {  Variable selling and admin. expenses} &  \text { \$ 16 per unit sold } \
  \text { Fixed production costs } &  \text {  \$ 200,000  } \
  \text { Fixed selling and admin. expenses } &  \text {\$ 140,000  } \ 
 \text {  Units produced} &  \text {  10,000 units} \
  \text {Units sold  } &  \text { 8.000 units } \
\end{array}$
  There were no beginning inventories.
-Refer to the figure.What is the net income for Eastwood using the variable costing method?

Quizplus · Accepted Answer

Under the variable costing method, only variable costs are considered in product costing. Fixed production costs are treated as period costs and expensed in the period incurred. To calculate net income:1. **Variable Costs per Unit:** Variable production costs ($40) + Variable selling and admin expenses ($16) = $56 per unit.2. **Total Variable Costs:** $56 per unit * 8,000 units sold = $448,000.3. **Total Revenue:** $150 per unit * 8,000 units sold = $1,200,000.4. **Contribution Margin:** Total Revenue - Total Variable Costs = $1,200,000 - $448,000 = $752,000.5. **Total Fixed Costs:** Fixed production costs ($200,000) + Fixed selling and admin expenses ($140,000) = $340,000.6. **Net Income:** Contribution Margin - Total Fixed Costs = $752,000 - $340,000 = $412,000.

Eastwood Company Has the Following Information for the Current Year