Question

caspian company produced 20,000 units and sold 18,000 during the current year. under absorption costing, net income was $25,000. fixed overhead was $190,000. determine the net income under variable costing.

Answer 1

To determine the net income under variable costing, deduct the total variable costs from the revenues. The net income under variable costing is $90,000.

Step-by-step explanation:

To determine the net income under variable costing, we need to consider only the variable costs that change with the level of production. In this case, the fixed overhead cost of $190,000 is not included in the calculation. The net income under variable costing is calculated by deducting the total variable costs from the revenues.

Given that the center sold 18,000 units and the variable costs are $15,000, the net income under variable costing can be calculated as follows:

Net Income = Revenues - Variable Costs
Net Income = $18,000 (units sold) * $20,000 (revenue per unit) - $18,000 (units sold) * $15,000 (variable cost per unit)
Net Income = $360,000 - $270,000
Net Income = $90,000