Question

Keyser Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $ 121 Units in beginning inventory Units produced Units sold Units in ending inventory 800 8,700 8,800 700 Variable costs per unit: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative expense Fixed costs: Fixed manufacturing overhead Fixed selling and administrative expense tA LA AtA $ 69,600 $163,300 The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month. What is the net operating income for the month under variable costing?

Answer 1

Ans.	KEYSER CORPORATION
	Variable Costing Income Statement
	PARTICULARS	Amount	Amount
	Sales   (8,800 * $121)		$1,064,800
	Less: Variable cost of goods sold:
	Beginning inventory   (800 * $76)	$60,800
	Add: Variable cost of goods manufactured (8,700 * $76)	$661,200
	Variable cost of goods available for sale	$722,000
	Less: Ending inventory (700 * $76)	-$53,200
	Variable cost of goods sold		$668,800
	Gross Contribution Margin		$396,000
	Less: Variable Selling and Administrative Expenses (8,800 * $17)		$149,600
	Contribution Margin		$246,400
	Less: Fixed expenses:
	Fixed manufacturing overhead	$69,600
	Fixed selling and administrative expenses	$163,300	$232,900
	Net operating income		$13,500
	*Beginning inventory    =   Units in beginning inventory * Variable unit product cost
	*Variable cost of goods manufactured = Units produced * Variable unit product cost
	*Ending inventory    =   Units in ending inventory * Variable unit product cost
	*Variable selling and administrative cost = Variable selling and administration cost per unit * Units sold
	In variable costing method, the unit product cost is the sum of only variable
	manufacturing costs per unit
	Unit product cost under Variable Costing:
	Direct materials	$26.00
	Direct labor	$43.00
	Variable Overhead per unit	$7.00
	Variable unit product cost	$76.00