Llywelyn, Inc. reports the following information for July: $$\begin{array} { | l | r | }
\hline \text { Sales Revenue } & \$ 960,000 \
\hline \text { Variable Costs } & 110,000 \
\hline \text { Operating Income } & 360,000 \
\hline
\end{array}$$ What is the total fixed cost using variable costing?
A) $850,000
B) $490,000
C) $250,000
D) $470,000

Question

Llywelyn, Inc. reports the following information for July: $$\begin{array} { | l | r | } 
\hline \text { Sales Revenue } & \$ 960,000 \
\hline \text { Variable Costs } & 110,000 \
\hline \text { Operating Income } & 360,000 \
\hline
\end{array}$$ What is the total fixed cost using variable costing?
A) $850,000
B) $490,000
C) $250,000
D) $470,000

Quizplus · Accepted Answer

In variable costing, fixed costs are not included in the cost of goods sold calculation. Therefore, to calculate the total fixed cost, we need to look at the contribution margin (sales minus variable expenses) and deduct it from the total net operating income. Using the given information, we can calculate the contribution margin as:

$3,000,000 - ($1,200,000 + $1,100,000 + $200,000 + $50,000) = $450,000

Then, we can use the contribution margin to calculate the total fixed cost:

$900,000 - $450,000 = $450,000

However, this is the variable portion of the total fixed cost. To get the total fixed cost, we need to add the fixed portion of the cost of goods sold (which is given as $40,000) to the variable portion of the selling and administrative expenses (which is given as $450,000):

$40,000 + $450,000 = $490,000

Therefore, the best choice is B: $490,000.

Llywelyn, Inc What Is the Total Fixed Cost Using Variable Costing? A)

Llywelyn, Inc What Is the Total Fixed Cost Using Variable Costing?
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