Question

Ethel started business this year and had the following costs variable manufacturing cost per unit. 53: foed manufacturing costs, 560,000, variable selling and administrative costs per unit, 56 and foed selling and administrative costs, $20,000. Ethel sells her product for $45 each. In addition, Ethel has provided the following information Planned production in units 10,000 Actual production in units 10,000 Number of units sold 9,507 Ether's income under variable costing is Select one: O a. $262,252 Ob. $350,770 O $266,689 Od None of the other answers are correct. Oe. $257,815

Answer 1

Ans.	Option A    $262,252
	*Calculations:
	Variable Costing Income Statement
	PARTICULARS		Amount
	Sales   (9,507 * $45)		$427,815
	Less: Variable cost of goods sold:
	Opening inventory	$0
	Add: Variable cost of goods manufactured (10,000 * $3)	$30,000
	Variable cost of goods available for sale	$30,000
	Less: Ending inventory [(10,000 - 9,507) * $3]	-$1,479
	Variable cost of goods sold		$28,521
	Gross Contribution Margin		$399,294
	Less: Variable Selling and Administrative Expenses (9,507 * $6)		$57,042
	Contribution Margin		$342,252
	Less: Fixed expenses:
	Fixed manufacturing overhead	$60,000
	Fixed selling and administrative expenses	$20,000	$80,000
	Net operating income		$262,252
	*Sales = Selling price per unit * Units sold
	*Variable cost of goods manufactured = Units produced * Variable manufacturing cost per unit
	*Variable selling and administrative expenses = Units sold * Variable selling and administrative cost per unit
	*Ending inventory = (Units produced - Units sold) * Variable manufacturing cost per unit