Radiant Protections experienced the following costs in 2017 (Assume the same unit costs in all years):...
Radiant Protections experienced the following costs in 2017 (Assume the same unit costs in all years):
Direct materials $4 per unit
Direct labor $8 per unit
Manufacturing Overhead Costs
Variable $2 per unit
Fixed $150,000
Selling & Administrative Costs
Fixed selling $30,000
Variable selling $1 per unit
Fixed administrative $20,000
During the year, the company manufactured 50,000 units and sold 45,000 units. Beginning inventory is zero. If net income for the year was $265,000 using full costing, what would net income be if the company used variable costing?
Group of answer choices
$270,000
$450,000
$250,000
$265,000
Homework Answers
Fixed manufacturing overhead cost per unit:
= $150,000 / 50,000
= $3
Overhead not applied under full costing:
= (50,000 - 45,000) X $3
= $15,000
Under variable cost $15,000 is also considered as expense because it is treated as periodic cost. $15,000 under full costing is in ending inventory of 5,000 (50,000 - 45,000)
Net operating income under variable costing:
= $265,000 - $15,000
= $250,000
3rd option
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