Question

Barnes Corporation has provided the following cost data for last year when 200,000 units were produced and sold:

Raw materials…………………..$250,000

Direct labor……………………..$100,000

Manufacturing Overhead……….$300,000

Selling and Admin. Expense…....$200,000

All costs are variable except for $170,000 Manufacturing Overhead and $80,000 Selling and Administrative Expense. There are no beginning or ending inventories. If the selling price is $15 per unit, the net operating income from producing and selling 210,000 units would be:

		$2,275,000
		$2,270,000
		$2,250,000
		$3,125,000

Answer 1

Answer

Calculation of variable cost for for 210,000 units

Calculation of net operating income from producing and selling 210,000 units

Particulars	Amount ($)	Amount ($)
Sales income (210,000*15)		3,150,000
Less:- Variable cost
1. Raw material cost	262,500
2. Direct labor	105,000
3. Manufacturing Overhead	136,500
4. Selling and Admin. Expense	126,000	(630,000)
Contribution Margin		2,520,000
Less:- Fixed cost
1. Manufacturing Overhead	170,000
2. Selling and Admin. Expense	80,000	(250,000)
Net operating income or EBIT		2,270,000