Question

Advanced Company reports the following information for the current year. All beginning inventory amounts equaled $0 this year. Units produced this year 28,000​ units Units sold this year 16,800​ units Direct materials $ 12​ per unit Direct labor $ 14​ per unit Variable overhead $ 3​ per unit Fixed overhead $ 140,000​ in total Given Advanced Company's data, and the knowledge that the product is sold for $59 per unit and operating expenses are $230,000, compute the net income under variable costing.

Answer 1

Net Income = $134,000

Step-by-step explanation:

Under the variable costing method, cost are classified by their behaviour in fixed cost and variable cost.

The operating income of Advanced Company would be computed as follows:

$

Sales revenue - (16,800 ×59)= 991,200

Variable costs :

(12 +14+3) × 16,800 = (487,200)

Contribution 504,000

Fixed overhead (140,000)

Operating expense (230,000)

Net Income 134,000