Mccrone Corporation has provided the following data for its two most recent years of operation: The net operating income (loss) under variable costing in Year 1 is closest to:
A) $380,000
B) $340,000
C) $180,000
D) $172,000

Question

Mccrone Corporation has provided the following data for its two most recent years of operation:  The net operating income (loss) under variable costing in Year 1 is closest to:
A) $380,000 
B) $340,000 
C) $180,000 
D) $172,000

Quizplus · Accepted Answer

To calculate the net operating income (loss) under variable costing in Year 1, we need to use the formula:
Sales - Variable expenses = Contribution margin - Fixed expenses = Net operating income (loss)

Using the information provided in the table, we can calculate the net operating income (loss) for Year 1 as follows:

Sales = $5,400,000
Variable expenses = $2,500,000 (direct materials, direct labor, variable overhead)
Contribution margin = Sales - Variable expenses = $2,900,000

Fixed expenses = $3,072,000 (fixed overhead + selling and administrative expenses)

Net operating income (loss) = Contribution margin - Fixed expenses
= $2,900,000 - $3,072,000
= -$172,000 [Note: negative sign indicates a net operating loss]

Therefore, the closest answer is D) $172,000.

Mccrone Corporation Has Provided the Following Data for Its Two