Question

Farris Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $ 116 Units in beginning inventory 0 Units produced 9,000 Units sold 8,600 Units in ending inventory 400 Variable costs per unit: Direct materials $ 19 Direct labor $ 61 Variable manufacturing overhead $ 7 Variable selling and administrative expense $ 11 Fixed costs: Fixed manufacturing overhead $ 135,000 Fixed selling and administrative expense $ 8,900 What is the net operating income (loss) for the month under variable costing

Answer 1

$10,900

Step-by-step explanation:

The computation of net operating income (loss) for the month under variable costing is shown below:-

Sales = Selling price × Units sold

= $116 × 8,600

= $997,600

Variable cost = (Direct material + Direct labor + Variable manufacturing overhead + Variable selling and administrative expenses) × Units sold

= ($19 + $61 + $7 + $11) × 8,600

= $98 × 8,600

= $842,800

Contribution Margin = Sales - Variable cost

= $997,600 - $842,800

= $154,800

Fixed cost = Fixed manufacturing overhead + Fixed selling and administrative expense

= $135,000 + $8,900

= $143,900

Net operating income = Contribution Margin - Fixed cost

= $154,800 - $143,900

= $10,900

Therefore for computing the net operating income we simply applied the above formula.