Question

ccrone Corporati

on has provided the following data for its two most recent years of operation:   
Selling price per unit   $   59
Manufacturing costs:        
Variable manufacturing cost per unit produced:        
Direct materials   $   11
Direct labor   $   6
Variable manufacturing overhead   $   4
Fixed manufacturing overhead per year   $   88,000
Selling and administrative expenses:        
Variable selling and administrative expense per unit sold   $   4
Fixed selling and administrative expense per year   $   80,000

    Year 1 Year 2

Units in beginning inventory   0   1,000
Units produced during the year   11,000   8,000
Units sold during the year   10,000   5,000
Units in ending inventory   1,000   4,000

The net operating income (loss) under variable costing in Year 1 is closest to:

Answer 1

calculation of net operating income:

sales revenue ($59*10,000 units)	590,000
less:variable costs
direct materials ($11*10,000)	(110,000)
direct labour ($6*10,000)	(60,000)
variable manufacturing overhead ($4*10,000)	(40,000)
variable selling and administration expense ($4*10,000)	(40,000)
contribution	340,000
less:fixed costs
fixed manufacturing ovehead	(88,000)
fixed selling and administrative expense	(80,000)
net operating income	172,000