(Appendix 5A)Wahler Corporation manufactures and sells one product.In the company's first year of operations, the variable cost consisted solely of direct materials of $85 per unit.The annual fixed costs were $640, 000 of direct labor cost, $2, 208, 000 of fixed manufacturing overhead expense, and $1, 140, 000 of fixed selling and administrative expense.The company does not have any variable manufacturing overhead costs or variable selling and administrative costs.During its first year of operations, the company produced 32, 000 units and sold 30, 000 units.The company's only product is sold for $249 per unit. The net operating income for the year under super-variable costing is:
A)$1, 110, 000
B)$932, 000
C)$972, 000
D)$762, 000

Question

Quizplus · Accepted Answer

Under super-variable costing, only variable manufacturing costs are included in the cost of goods sold. The variable cost per unit is $85, and the company produced 32,000 units, resulting in total variable manufacturing costs of $2,720,000.

The contribution margin per unit is $249 - $85 = $164. The company sold 30,000 units, resulting in total sales of $7,470,000.

The total fixed costs for the year were $640,000 + $2,208,000 + $1,140,000 = $3,988,000.

Using the super-variable costing method, the net operating income can be calculated as follows:

Net operating income = Total contribution margin - Total variable manufacturing costs - Fixed costs
Net operating income = $4,920,000 - $2,720,000 - $3,988,000
Net operating income = $932,000

Therefore, the best choice is (B) $932,000.

(Appendix 5A)Wahler Corporation Manufactures and Sells One Product