Allston Products sells a special kind of effects pedal for musical performers.Each unit sells for $20.00.Additional data for the month of April 2017,are as follows:
$$\begin{array} { | l | l | l | }
\hline \text { Direct materials } &\$ 4.00& \text { per unit } \
\hline \text { Direct labour } & \$ 8.00 &\text { per unit } \
\hline \text { Variable manufacturing overhead } & \$ 20,000 & \text { per month } \
\hline \text { Fixed manufacturing overhead } & \$ 17,000 & \text { per month } \
\hline \text { Operating expenses } & \$ 24,000 & \text { per month } \
\hline & & \
\hline \text { Beginning inventory } &0 & \text { units } \
\hline \text { Units produced } & 3000 & \text { units } \
\hline \text { Units sold } & 5500 & \text { units } \
\hline \text { Ending inventory } & 700 & \text { units } \
\hline
\end{array}$$
Using variable costing,how much is the net operating profit for April?

Question

Allston Products sells a special kind of effects pedal for musical performers.Each unit sells for $20.00.Additional data for the month of April 2017,are as follows:
$$\begin{array} { | l | l | l | } 
\hline \text { Direct materials } &\$ 4.00& \text { per unit } \
\hline \text { Direct labour } &  \$ 8.00 &\text { per unit }  \
\hline \text { Variable manufacturing overhead } & \$ 20,000 & \text { per month } \
\hline \text { Fixed manufacturing overhead } & \$ 17,000 & \text { per month } \
\hline \text { Operating expenses } & \$ 24,000 & \text { per month } \
\hline & & \
\hline \text { Beginning inventory } &0  &  \text { units } \
\hline \text { Units produced } & 3000 & \text { units } \
\hline \text { Units sold } & 5500 & \text { units } \
\hline \text { Ending inventory } & 700 & \text { units } \
\hline
\end{array}$$
Using variable costing,how much is the net operating profit for April?

Quizplus · Accepted Answer

Variable costing only considers variable costs in the calculation of net operating profit. In this case, the variable costs are direct materials, direct labour, and variable manufacturing overhead. The total variable cost per unit is $4.00 + $8.00 + $2.00 = $14.00. The total variable cost for the 5500 units sold is $14.00 x 5500 = $77,000. The net operating profit is the difference between the sales revenue and the total variable cost, which is $20.00 x 5500 - $77,000 = $11,250.

Allston Products Sells a Special Kind of Effects Pedal for Musical