Use the following information for items
Green Company sells its product for $11,000 per unit.Variable costs per unit are: manufacturing, $6,000; and selling and administrative, $125.Fixed costs are: $30,000 manufacturing overhead, and $40,000 selling and administrative.There was no beginning inventory at 1/1/14.Production was 20 units per year in 2014-2016.Sales were 20 units in 2014, 16 units in 2015, and 24 units in 2016.
-Income under variable costing for 2015 is
A)$ 8,000.
B)$14,000.
C)$16,000.
D)$22,000.

Question

Use the following information for items 
Green Company sells its product for $11,000 per unit.Variable costs per unit are: manufacturing, $6,000; and selling and administrative, $125.Fixed costs are: $30,000 manufacturing overhead, and $40,000 selling and administrative.There was no beginning inventory at 1/1/14.Production was 20 units per year in 2014-2016.Sales were 20 units in 2014, 16 units in 2015, and 24 units in 2016.
-Income under variable costing for 2015 is
A)$ 8,000.
B)$14,000.
C)$16,000.
D)$22,000.

Quizplus · Accepted Answer

Under variable costing, income is calculated by subtracting variable costs and fixed costs from sales revenue. In 2015, sales revenue is $11,000 x 16 units = $176,000. Variable costs are ($6,000 + $125) x 16 units = $98,000. Total fixed costs are $30,000 + $40,000 = $70,000. Income = $176,000 - $98,000 - $70,000 = $8,000.

Use the Following Information for Items