SailFind,Inc.has collected the following data.(There are no beginning inventories.) $$\begin{array} { | l | r | }
\hline \text { Units produced } & { 580 \text { units } } \
\hline \text { Sales price } & \$ 130 \text { per unit } \
\hline \text { Direct materials } & \$ 19 \text { per unit } \
\hline \text { Direct labor } & \$ 15 \text { per unit } \
\hline \text { Variable manufacturing overhead } & \$ 5 \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 15,200 \text { per year } \
\hline \text { Variable selling and administrative costs } & \$ 6 \text { per unit } \
\hline \text { Fixed selling and administrative costs } & \$ 16,400 \text { per year } \
\hline
\end{array}$$ What is the operating income using variable costing if 550 units are sold?
A) $15,150
B) $46,750
C) $55,100
D) $6,850

Question

SailFind,Inc.has collected the following data.(There are no beginning inventories.) $$\begin{array} { | l | r | } 
\hline \text { Units produced } & { 580 \text { units } } \
\hline \text { Sales price } & \$ 130 \text { per unit } \
\hline \text { Direct materials } & \$ 19 \text { per unit } \
\hline \text { Direct labor } & \$ 15 \text { per unit } \
\hline \text { Variable manufacturing overhead } & \$ 5 \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 15,200 \text { per year } \
\hline \text { Variable selling and administrative costs } & \$ 6 \text { per unit } \
\hline \text { Fixed selling and administrative costs } & \$ 16,400 \text { per year } \
\hline
\end{array}$$ What is the operating income using variable costing if 550 units are sold?
A) $15,150
B) $46,750
C) $55,100
D) $6,850

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. The calculation for operating income under variable costing is as follows:1. Calculate the variable cost per unit:   - Direct materials: $19   - Direct labor: $15   - Variable manufacturing overhead: $5   - Variable selling and administrative costs: $6   Total variable cost per unit = $19 + $15 + $5 + $6 = $452. Calculate total variable costs for units sold:   - Total variable cost for 550 units = $45 * 550 = $24,7503. Calculate total revenue:   - Sales price per unit = $130   - Total revenue for 550 units = $130 * 550 = $71,5004. Subtract total variable costs and fixed costs from total revenue to find operating income:   - Total fixed costs = Fixed manufacturing overhead ($15,200) + Fixed selling and administrative costs ($16,400) = $31,600   - Operating income = Total revenue - Total variable costs - Total fixed costs   - Operating income = $71,500 - $24,750 - $31,600 = $15,150

SailFind,Inc What Is the Operating Income Using Variable Costing If 550