Penn Company reported the following information about the production and sale of its only product during the first month of operations: Under variable costing,the operating income or loss is ________.
A)$(6,000)
B)$(70,000)
C)$10,000
D)$41,000

Question

Penn Company reported the following information about the production and sale of its only product during the first month of operations:  Under variable costing,the operating income or loss is ________.
A)$(6,000) 
B)$(70,000) 
C)$10,000 
D)$41,000

Quizplus · Accepted Answer

Using the formula for calculating operating income under variable costing:

Operating Income = Sales - (Variable Cost of Goods Sold + Variable Selling Expenses + Variable Administrative Expenses)

Operating Income = $250,000 - ($190,000 + $40,000 + $26,000)
Operating Income = $250,000 - $256,000
Operating Income = $(6,000)

Therefore, the answer is A: $(6,000).

Penn Company Reported the Following Information About the Production and Sale