Question

Osawa, Inc., planned and actually manufactured 200,000 units of its single product in 2017, its first year of operation. Variable manufacturing cost was $20 per unit produced. Variable operating (nonmanufacturing) cost was $10 per unit sold. Planned and actual fixed manufacturing costs were $600,000. Planned and actual fixed operating (nonmanufacturing) costs totaled $400,000. Osawa sold 120,000 units of product at $40 per unit.

Required:

​Osawa's 2017 operating income using variable costing is​:________

(a) $ 620,000​,

​(b) $ 340,000​,

​(c) $ 200,000​,

​(d) $ 560,000​, or​

(e) none of these.

Show supporting calculations. Begin by selecting the labels used in the variable costing calculation of operating income and enter the supporting amounts. Perform the calculations in this​ step, but select the correct operating income in the next step.

Answer 1

The correct answer is C.

Step-by-step explanation:

The variable costing method incorporates all variable production costs (direct material, direct labor, and variable overhead).

We need to calculate the net operating income:

Sales= 120,000*40= 4,800,000

Total variable cost= (20 + 10)*120,000= (3,600,000)

Total contribution margin= 1,200,000

Fixed manufacturing costs= (600,000)

Fixed operating (nonmanufacturing) costs= (400,000)

Net operating income= 200,000