Lilypad Hot Tubs, Inc. reports the following information for August: $$\begin{array} { | l | r | }
\hline \text { Sales Revenue } & \$ 640,000 \
\hline \text { Variable Costs } & 210,000 \
\hline \text { Fixed Costs } & 73,000 \
\hline
\end{array}$$ Calculate the operating income for August using variable costing.
A) $430,000
B) $567,000
C) $357,000
D) $640,000

Question

Lilypad Hot Tubs, Inc. reports the following information for August: $$\begin{array} { | l | r | } 
\hline \text { Sales Revenue } & \$ 640,000 \
\hline \text { Variable Costs } & 210,000 \
\hline \text { Fixed Costs } & 73,000 \
\hline
\end{array}$$ Calculate the operating income for August using variable costing.
A) $430,000
B) $567,000
C) $357,000
D) $640,000

Quizplus · Accepted Answer

Operating income using variable costing can be calculated using the formula:
Sales - Variable expenses - Fixed expenses
Based on the given data, we have:
Sales: $900,000
Variable expenses: ($300,000 + 72,000 + $171,000) = $543,000
Fixed expenses: $0 (all fixed expenses are treated as period costs and deducted from sales in the period incurred in variable costing)
Therefore, operating income = $900,000 - $543,000 - $0 = $357,000.Thus, the answer is C.

Lilypad Hot Tubs, Inc Calculate the Operating Income for August Using Variable Costing