For the month ended October 31^st, there are no finished goods or work in process inventories at the beginning of the month for the Fleetfoot Company. Net sales $8,400
Product costs:
Variable 3,780
Fixed 1,890
Selling and Administrative costs:
Variable 588
Fixed 840
Units manufactured 210
Units sold 180
Under variable costing, Fleetfoot's operating income for the year is:

Question

Quizplus · Accepted Answer

Under variable costing, only variable product costs are included in the cost of goods sold. 
Variable product costs per unit = $3,780/210 = $18
Variable product costs for 180 units sold = $18 x 180 = $3,240
Contribution margin = Net sales - Variable product costs = $8,400 - $3,240 = $5,160
Total variable selling and administrative costs = $588
Contribution margin - Total variable selling and administrative costs = $4,572
Operating income under variable costing = Fixed product costs + Fixed selling and administrative costs = $1,890 + $840 = $2,730
$2,730 - $4,572 = -$1,842
Therefore, the operating income for the year is $1,842.

For the Month Ended October 31st, There Are No Finished

For the Month Ended October 31^st, There Are No Finished