Bethel, Inc. has collected the following data. (There are no beginning inventories.) $$\begin{array} { | l | r | l | }
\hline \text { Units produced } & 530 & \text { units } \
\hline \text { Sales price } & \$ 140 & \text { per unit } \
\hline \text { Direct materials } & \$ 17 & \text { per unit } \
\hline \text { Direct labor } & \$ 13 & \text { per unit } \
\hline \text { Variable manufacturing overhead } & \$ 10 & \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 19,200 & \text { per year } \
\hline \text { Variable selling and administrative costs } & \$ 10 & \text { per unit } \
\hline \text { Fixed selling and administrative costs } & \$ 10,000 & \text { per year } \
\hline
\end{array}$$ What is the operating income using variable costing if 500 units are sold?
A) $15,800
B) $45,000
C) $60,000
D) $4200

Question

Bethel, Inc. has collected the following data. (There are no beginning inventories.) $$\begin{array} { | l | r | l | } 
\hline \text { Units produced } & 530 & \text { units } \
\hline \text { Sales price } & \$ 140 & \text { per unit } \
\hline \text { Direct materials } & \$ 17 & \text { per unit } \
\hline \text { Direct labor } & \$ 13 & \text { per unit } \
\hline \text { Variable manufacturing overhead } & \$ 10 & \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 19,200 & \text { per year } \
\hline \text { Variable selling and administrative costs } & \$ 10 & \text { per unit } \
\hline \text { Fixed selling and administrative costs } & \$ 10,000 & \text { per year } \
\hline
\end{array}$$ What is the operating income using variable costing if 500 units are sold?
A) $15,800
B) $45,000
C) $60,000
D) $4200

Quizplus · Accepted Answer

Variable costing includes all variable production costs (direct materials, direct labor, and variable manufacturing overhead) in the cost of goods sold and excludes fixed manufacturing overhead, which is treated as a period cost and deducted from revenue in its entirety. To calculate the operating income using variable costing:1. Calculate the variable cost per unit: $17 (direct materials) + $13 (direct labor) + $10 (variable manufacturing overhead) + $10 (variable selling and administrative costs) = $50 per unit.2. Calculate the total variable cost for 500 units sold: 500 units * $50 = $25,000.3. Calculate the total revenue for 500 units sold: 500 units * $140 = $70,000.4. Deduct the total variable costs from the total revenue: $70,000 - $25,000 = $45,000.5. Deduct the fixed costs (both manufacturing and selling & administrative) from the result in step 4: $45,000 - $19,200 (fixed manufacturing overhead) - $10,000 (fixed selling and administrative costs) = $15,800.Therefore, the operating income using variable costing is $15,800.

Bethel, Inc What Is the Operating Income Using Variable Costing If 500