Question

Steering Manufacturing produces snow shovels. The selling price per snow shovel is $29.00. There is no beginning inventory. Costs involved in production are: Direct material $5.00 Direct labor 4.00 Variable manufacturing overhead 4.00 Total variable manufacturing costs per unit $13.00 Fixed manufacturing overhead per year $181,170 In addition, the company has fixed selling and administrative costs of $172,400 per year. During the year, Steering produces 54,900 snow shovels and sells 49,560 snow shovels.

What is net income using variable costing?

Net income $______

Answer 1

Ans.	STEERING MANUFACTURING
	Variable Costing Income Statement
	PARTICULARS		Amount
	Sales		$1,437,240
	Less: Variable cost of goods sold:
	Opening inventory	$0
	Add: Variable cost of goods manufactured	$713,700
	Variable cost of goods available for sale	$713,700
	Less: Ending inventory	-$69,420
	Variable cost of goods sold		$644,280
	Gross Contribution Margin		$792,960
	Less: Variable Selling and Administrative Expenses		$0
	Contribution Margin		$792,960
	Less: Fixed expenses:
	Fixed manufacturing overhead	$181,170
	Fixed selling and administrative expenses	$172,400	$353,570
	Net operating income		$439,390
	*Working Notes:
	*Sales = Units sold * Selling price
	49,560 * $29
	$1,437,240
	*Variable cost of goods manufactured = Units produced * Variable manufacturing cost per unit
	54,900 * $13
	$713,700
	*Ending inventory   = (Units produced - Units sold) * Variable manufacturing cost per unit
	(54,900 - 49,560) * $13
	5,340 * $13
	$69,420