Question

Diego Company manufactures one product that is sold for $70 per unit in two geographic regions—the East and West regions. The following information pertains to the company's first year of operations in which it produced 53,000 units and sold 48,000 units. 10 Variable costs per unit: Manufacturing Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year. Fixed manufacturing overhead Fixed selling and administrative expenses 2. s 1,060,000 S 557,000 The company sold 36,000 units in the East region and 12.000 units in the West region. It determined that $270,000 of its fixed selling and administrative expenses is traceable to the West region, $220,000 is traceable to the East region, and the remaining $67,000 is a common fixed cost. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product. Required: What is the company's net operating income (loss) under variable costing? (Input the amount as a positive value.) (Click to select) S

Answer 1

Answer
Net Operating loss	$              33,000
Calculated as
Income Statement
	Total Company	East	West
Sales = Units sold x Selling price per unit	$        3,360,000	$        2,520,000	$        840,000
Variable Expenses = units sold x variable expense per unit	$        1,776,000	$        1,332,000	$        444,000
Contribution margin	$        1,584,000	$        1,188,000	$        396,000
Traceable fixed expenses	$            490,000	$            220,000	$        270,000
Region segment margin	$        1,094,000	$            968,000	$        126,000
Common fixed expenses not traceable to regions	$        1,127,000
Net Operating Income	$            (33,000)
Variable expense per unit
Direct material	$                       21
Direct Labor	$                       10
Variable Manufacturing overhead	$                         2
Variable Selling and Administrative overhead	$                         4
Variable expense per unit	$                       37

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