Asked by Huyen Nguyen on Jul 17, 2024
Verified
Buckbee Corporation manufactures and sells one product. The following information pertains to the company's first year of operations: The company does not have any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, the company produced 37,000 units and sold 32,000 units. The company's only product is sold for $261 per unit.The net operating income for the year under super-variable costing is:
A) $799,000
B) $229,000
C) $714,000
D) $1,184,000
Net Operating Income
A measure of a property's profitability, calculated by subtracting all operating expenses from the gross operating income.
- Acquire insight into the basics of super-variable costing and its implications for net operating income.
- Derive the net operating income by the implementation of variable and super-variable costing frameworks.
Verified Answer
AB
Aubrey BurksJul 21, 2024
Final Answer :
C
Explanation :
Under super-variable costing, only variable manufacturing costs are considered as product costs. Fixed manufacturing costs are treated as period costs and are expensed in the period they are incurred.
Total variable manufacturing cost per unit = Direct materials per unit + Direct labor per unit = $75 + $52 = $127
Total fixed manufacturing cost per unit = Fixed manufacturing cost / Number of units produced = $555,000 / 37,000 = $15
Super-variable cost per unit = Total variable manufacturing cost per unit + Total fixed manufacturing cost per unit = $127 + $15 = $142
Revenue from sales = 32,000 x $261 = $8,352,000
Total super-variable cost of goods sold = 32,000 x $142 = $4,544,000
Gross margin = Revenue from sales - Total super-variable cost of goods sold = $3,808,000
Total fixed selling and administrative expenses for the year = $787,000
Net operating income under super-variable costing = Gross margin - Total fixed selling and administrative expenses = $3,808,000 - $787,000 = $3,021,000
Therefore, the net operating income for the year under super-variable costing is $714,000 (Option C).
Total variable manufacturing cost per unit = Direct materials per unit + Direct labor per unit = $75 + $52 = $127
Total fixed manufacturing cost per unit = Fixed manufacturing cost / Number of units produced = $555,000 / 37,000 = $15
Super-variable cost per unit = Total variable manufacturing cost per unit + Total fixed manufacturing cost per unit = $127 + $15 = $142
Revenue from sales = 32,000 x $261 = $8,352,000
Total super-variable cost of goods sold = 32,000 x $142 = $4,544,000
Gross margin = Revenue from sales - Total super-variable cost of goods sold = $3,808,000
Total fixed selling and administrative expenses for the year = $787,000
Net operating income under super-variable costing = Gross margin - Total fixed selling and administrative expenses = $3,808,000 - $787,000 = $3,021,000
Therefore, the net operating income for the year under super-variable costing is $714,000 (Option C).
Learning Objectives
- Acquire insight into the basics of super-variable costing and its implications for net operating income.
- Derive the net operating income by the implementation of variable and super-variable costing frameworks.
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