Question

Jones Company incurred the following costs while producing 100 chairs: Units produced 100 chairs Direct materials $10 per unit Direct labor 15 per unit Variable manufacturing overhead 3 per unit Total fixed manufacturing overhead 2,000 Variable selling and administrative 4 per unit Fixed selling and administrative 3,000 What is operating income using variable costing if 90 units were sold for $150 each?

Answer 1

Operating Income under Variable Costing = $5,620

Step-by-step explanation:

Jones Company

Variable costing income statement

For the month of June 30, 20YY

Sales (90 units × $150) $13,500

Less: Variable expenses

Direct materials (90 units × $10) = $900

Direct labor (90 units × $15) = $1,350

Variable manufacturing overhead (90 units × $3) = $270

Total variable expenses ($2,520)

Variable manufacturing margin $10,980

Less: Variable selling and administrative (90×$4) $360

Contribution Margin $10,620

Less: Fixed Expenses

Manufacturing overhead $2,000

Selling and administrative $3,000

Total fixed expenses $(5,000)

Net Operating Income = $5,620