Last year,fixed manufacturing overhead costs were $30,000,variable production costs were $48,000,fixed selling and administration costs were $20,000,and variable selling administrative expenses were $9,600.There was no beginning inventory.During the year,3,000 units were produced and 2,400 units were sold at a price of $40 per unit.Under variable costing,what would be the operating income (loss)?
A) $6,000.
B) $4,000.
C) ($2,000).
D) ($4,400).

Question

Quizplus · Accepted Answer

Under variable costing, only variable costs (production and selling/administrative expenses) are included in the cost of goods sold. Therefore, the cost of goods sold would be $48,000 + $9,600 = $57,600. The contribution margin per unit would be $40 (selling price) - $16 (variable cost per unit = $48,000 ÷ 3,000) = $24. The contribution margin for all 2,400 units sold would be $24 x 2,400 = $57,600. The operating income (loss) would be the contribution margin of $57,600 minus the fixed manufacturing overhead of $30,000, and fixed selling and administrative costs of $20,000, which is ($2,000).

Last Year,fixed Manufacturing Overhead Costs Were $30,000,variable Production Costs Were