Jarvix Corporation,which has only one product,has provided the following data concerning its most recent month of operations: The company produces the same number of units every month,although the sales in units vary from month to month.The company's variable costs per unit and total fixed costs have been constant from month to month. What is the net operating income for the month under variable costing?
A)$25,900
B)$2,100
C)$17,800
D)$18,500

Question

Jarvix Corporation,which has only one product,has provided the following data concerning its most recent month of operations:  The company produces the same number of units every month,although the sales in units vary from month to month.The company's variable costs per unit and total fixed costs have been constant from month to month. What is the net operating income for the month under variable costing?
A)$25,900 
B)$2,100 
C)$17,800 
D)$18,500

Quizplus · Accepted Answer

Under variable costing, only the variable production costs are included in the cost of goods sold. Fixed manufacturing overhead costs are treated as a period expense and are not included in the cost of goods sold. Therefore, the contribution margin is calculated as follows:

Contribution Margin = Sales - Variable Costs
Contribution Margin = $97,000 - ($28,000 + $22,000)
Contribution Margin = $47,000

Net operating income is calculated by subtracting total fixed expenses from contribution margin:

Net Operating Income = Contribution Margin - Fixed Expenses
Net Operating Income = $47,000 - $28,500
Net Operating Income = $18,500

Therefore, the correct answer is D) $18,500.

Jarvix Corporation,which Has Only One Product,has Provided the Following Data