Question

Variable-Costing Income Statement During the most recent year, Osterman Company had the following data: Units in beginning inventory Units produced 10,000 Units sold ($47 per unit) 9,300 Variable costs per unit: Direct materials $9 $6 $4 Direct labor Variable overhead Fixed costs: Fixed overhead per unit produced Fixed selling and administrative $5 $ 138,000 Required: 1. Calculate the cost of goods sold under variable costing.

Answer 1

Answers

• Requirement 1
  Cost of Goods sold under Variable costing include ONLY variable manufacturing expense
  = 9300 units sold x ($9 material + $ 6 labor + $ 4 overhead)
  = 9300 x 19
  = $ 176,700

• Requirement 2

Osterman Company

Income Statement under Variable Costing

For the Most Recent Year

Sales revenue	[9300 units x $ 47]	$437,100
Less: Variable cost	[9300 units x $ 19]	$176,700
Contribution margin		$260,400
Less: Fixed cost
Fixed overhead [10000 units x $5]	$50,000
Fixed selling & admin expense	$138,000	$188,000
Operating Income		$72,400