Question

Tustin Corporation has provided the following data for its two most recent years of operation: Selling price per unit $ 68 Manufacturing costs: Variable manufacturing cost per unit produced: Direct materials $ 10 Direct labor $ 6 Variable manufacturing overhead $ 4 Fixed manufacturing overhead per year $ 220,000 Selling and administrative expenses: Variable selling and administrative expense per unit sold $ 6 Fixed selling and administrative expense per year $ 61,000 Year 1 Year 2 Units in beginning inventory 0 1,000 Units produced during the year 11,000 10,000 Units sold during the year 10,000 7,000 Units in ending inventory 1,000 4,000 The net operating income (loss) under variable costing in Year 1 is closest to:

Answer 1

Answer:

The net operating income under variable costing is $139,000

Explanation:

                                 Tustin Corporation

            Contribution Margin Income Statement for 1st year

                                                                         Amount

Revenue                                                    $680,000

(10,000 * $68)

Less: Variable Expense

Direct Material =                                             $100,000

(10,000 * $10)

Direct Labor=                                               $60,000

(10,000 * $6)

Variable manufacturing overhead                     $40,000

(10,000 * $4)

Variable selling and administrative                   $60,000  

expense (10,000 * $6)

Contribution                                                       $420,000

Less: Fixed Costs

Fixed Manufacturing overhead                       $220,000

Fixed selling and administrative                         $61,000

overhead  

Net Income                                                           $139,000