Question

Hillsborough Street Manufacturing Inc. Hillsborough Street Manufacturing Inc. incurred the following costs in 2011 Direct materials used Direct labor costs Factory rent and utilities Factory equipment depreciation Marketing expenses Administrative expenses $62,000 90,000 15,000 2,000 8,000 10,000 45,000 units were produced during the year out of which 38,000 units were sold for $10 each. There was no beginning or ending raw materials or work in process inventory Refer to the Hillsborough Street Manufacturing Inc. information above. What is the net operating income for the year? (Ignore taxes) $222,500 $219,120 $280,500 $250,230

Answer 1

a	Direct Material	62000
b	Direct Labour	90000
C	Total Variable cost (a+b)	152000
d	No of Units	45000
e	Variable cost per unit	3.377778
Operating income statement for the year
e	Variable cost per unit	3.377778
g	No of units sold	38000
h	Total variable cost (e*g)	128355.6
I	Factory rent and utilities	15000
j	Factory equipment depreciation	2000
k	Marketing expense	8000
l	administrative expense	10000
m	Total expenses	163355.6
n	Total Income (g*10)	380000
Net operating income (n-m)		216644.4
Note: Costs other than variable costs are treated as period costs and they are completely expesed in the current year and not carried with closing inventory