Question

Belle company reports the following information for the current year. all beginning inventory amounts equaled $0 this year. units produced this year 45,000 units units sold this year 27,000 units direct materials $ 17 per unit direct labor $ 19 per unit variable overhead $ 3 per unit fixed overhead $ 258,750 in total belle company's product is sold for $64 per unit a variable selling and administrative expense is $2 per unit and fixed selling and administrative is $250,000 per year. compute the net income under variable costing.

Answer 1

To compute the net income under variable costing, we need to calculate the total variable cost and deduct it from the sales revenue. The net income under variable costing for Belle Company is $166,250.

Step-by-step explanation:

To calculate net income under variable costing, we need to calculate the total variable cost by multiplying the variable cost per unit by the number of units sold. Here's how we can do it:

1. Variable cost per unit: Direct materials cost + Direct labor cost + Variable overhead cost = $17 + $19 + $3 = $39 per unit
2. Total variable cost: Variable cost per unit x Units sold = $39 x 27,000 = $1,053,000
3. Fixed overhead cost: $258,750
4. Fixed selling and administrative expenses: $250,000
5. Total fixed cost: Fixed overhead cost + Fixed selling and administrative expenses = $258,750 + $250,000 = $508,750
6. Total cost: Total variable cost + Total fixed cost = $1,053,000 + $508,750 = $1,561,750
7. Gross profit: Sales revenue - Total variable cost = $64 x 27,000 - $1,053,000 = $1,728,000 - $1,053,000 = $675,000
8. Net income: Gross profit - Total fixed cost = $675,000 - $508,750 = $166,250