Question

Windham Corporation has provided the following cost data for last year when 350,000 units were produced and sold: Raw materials...-__ $350,000 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 $5 per unit, the net operating income from producing and selling 310,000 units would be: $620,000 $930,000 $1,550,000 $680,000

Answer 1

Option D is correct. $600,000 Calculation: Sales $1,550,000 less: Variable cost $ 690,000 less: fixed cost $ 250,ooo Net Operating Income I$ 680,000) Variable variable Sales & Units sold & Sales Price per unit = 310,000 & $5 per unit = $1,550,000 Variable cost / Raw materials & Direct Labor + Manufacturing per unit over head & variating and Admin- Expense) & Units sold] firstly, we will calculathe manufacturing over head and variable selling and admin. expense Variable Manufacturing overhead = (Total manufacturing overhead - fixed Manufacturing Over head') = $ 300,000 - $ 170,000 - $130,000 Variable selling and admin expense = (selling and adnun. expense - fixed selling and admin. expense) = $200,000 - $80,000 = $ 120,000

Now, variable cost per unit = {($350,000 + $100,000+ $130,000 + $120,000) = 350,000 units] = $700,000 350,000 units = $2 per unit Variable cost = Variable cost per unit x Units sold a $2 per unit x 310,000 units = $ 620,000 fixed cost = (Fixed manufacturing overhead & fixed selling and Adnun. Expense) z $ 170,000 + $ 80,000 z $250,000