Austin Company The following information is available for Austin Company for its first year of operations:
Refer to Austin Company. If Austin Company had used variable costing, what amount of income before income taxes would it have reported?
A) $30,000
B) ($7,500)
C) $67,500
D) cannot be determined from the information given

Question

Austin Company The following information is available for Austin Company for its first year of operations:
 Refer to Austin Company. If Austin Company had used variable costing, what amount of income before income taxes would it have reported?
A) $30,000 
B) ($7,500) 
C) $67,500 
D) cannot be determined from the information given

Quizplus · Accepted Answer

To calculate income before income taxes under variable costing, we need to only consider the variable manufacturing costs: 
Sales - Variable manufacturing costs - Variable selling and administrative expenses - Fixed manufacturing costs - Fixed selling and administrative expenses = Income before income taxes

Using the given information: 
$210,000 - ($100,000 + $27,500 + $85,500) - $35,000 - $45,000 - $15,000 = ($7,500)

Therefore, the answer is B.

Austin Company the Following Information Is Available for Austin Company