Krepps Corporation produces a single product. Last year, Krepps manufactured 30,030 units and sold 24,700 units....

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Question

Krepps Corporation produces a single product. Last year, Krepps manufactured 30,030 units and sold 24,700 units....

Krepps Corporation produces a single product. Last year, Krepps manufactured 30,030 units and sold 24,700 units. Production costs for the year were as follows:


Direct materials	$	243,243
Direct labor	$	126,126
Variable manufacturing overhead	$	237,237
Fixed manufacturing overhead	$	420,420

Sales totaled $1,272,050 for the year, variable selling and administrative expenses totaled $133,380, and fixed selling and administrative expenses totaled $195,195. There was no beginning inventory. Assume that direct labor is a variable cost.

Under variable costing, the company's net operating income for the year would be:

Multiple Choice

$28,249 lower than under absorption costing.
$28,249 higher than under absorption costing.
$74,620 lower than under absorption costing.
$74,620 higher than under absorption costing.

business accounting

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Answer 1

Answer #1

Answer- Under variable costing, the company's net operating income for the year would be= $74620 lower than under absorption costing.

Explanation-

Krepps Corporation
Income statement (Using variable costing approach)
Particulars			Amount
			$
Sales (a)			1272050

Less:- Variable cost of goods sold (b)
Opening inventory		NIL
Add:- Variable cost of goods manufactured		606606
Direct materials		243243
Direct labor		126126
Variable manufacturing overhead		237237

Variable cost of goods available for sale		606606
Less:- Closing inventory	5330 units*$20.2 per unit	107666	498940

Gross contribution margin C= a-b			773110
Less:-Variable selling & administrative exp.			133380
Contribution margin			639730
Less:- Fixed costs
Manufacturing overhead			420420
Selling & administrative exp.			195195
Net Income			24115

Krepps Corporation
Income statement (Using absorption costing approach)
Particulars			Amount
			$
Sales (a)			1272050

Less:- Cost of goods sold (b)
Opening inventory
Add:- Cost of goods manufactured		606606
Direct materials		243243
Direct labor		126126
Variable manufacturing overhead		237237
Fixed Manufacturing overhead		420420
Cost of goods available for sale		1027026
Less:- Closing inventory	5330 units*$34.2 per unit	182286	844740

Gross margin C= a-b			427310
Less:-Variable selling & administrative exp.			133380

Less:- Fixed costs
Selling & administrative exp.			195195
Net Income			98735

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Answer 2

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Krepps Corporation produces a single product. Last year, Krepps manufactured 30,030 units and sold 24,700 units....

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