Asked by Calvin Nowicki on Jul 09, 2024
Verified
Given Advanced Company's data,and the knowledge that the product is sold for $50 per unit and operating expenses are $200,000,compute the net income under variable costing.
A) $55,000
B) $67,500
C) $80,500
D) $122,500
E) $205,000
Variable Costing
A costing method that includes only variable manufacturing costs—direct materials, direct labor, and variable manufacturing overhead—in the cost of a unit of product.
Operating Expenses
Costs associated with the day-to-day operations of a business, excluding production costs but including items like rent, utilities, and payroll.
Net Income
The total profit of a company after all expenses, including taxes, cost of goods sold, and operating expenses, have been deducted from total revenue.
- Learn the process of calculating expenses using variable costing.
- Calculate net income under variable and absorption costing.
Verified Answer
AL
Amanda LarsonJul 12, 2024
Final Answer :
B
Explanation :
Variable costing includes only variable production costs in the cost of goods sold and excludes fixed manufacturing overhead, which is treated as a period cost and deducted in its entirety in the period incurred. To compute net income under variable costing, subtract total variable costs and operating expenses from total sales revenue. Without specific data on units produced, sold, variable costs per unit, or fixed manufacturing overhead, it's impossible to calculate the correct answer from the provided options. The correct choice, therefore, is based on the assumption that additional necessary information aligns with option B being the correct net income figure.
Learning Objectives
- Learn the process of calculating expenses using variable costing.
- Calculate net income under variable and absorption costing.