Souffront Corporation manufactures and sells one product. In the company's first year of operations, the variable cost consisted solely of direct materials of $102 per unit. The annual fixed costs were $1,488,900 of direct labor cost, $3,970,800 of fixed manufacturing overhead expense, and $1,735,200 of fixed selling and administrative expense. 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 61,800 units and sold 57,800 units. The company's only product is sold for $266 per unit. The net operating income for the year under super-variable costing is:
A) $2,284,300
B) $2,749,989
C) $3,773,200
D) $6,255,100

Question

Quizplus · Accepted Answer

Under super-variable costing, only variable costs are considered product costs. The contribution margin per unit is $266 - $102 = $164. Total contribution margin is 57,800 units * $164 = $9,479,200. Total fixed costs are $1,488,900 + $3,970,800 + $1,735,200 = $7,194,900. Net operating income is $9,479,200 - $7,194,900 = $2,284,300.

Souffront Corporation Manufactures and Sells One Product