Math  /  Data & Statistics

QuestionLewes Company produced 8.000 units of inventory and sold 6,000. The company incurred the following production costs: Variable manufacturing cost $12.00\$ 12.00 per unit Fixed manufacturing overhead cost $60,000\$ 60,000 Assuming the company sells its product at a price of $25\$ 25 per unit, and incurred $10,000\$ 10,000 in selling and administrative cost, what is the amount of net income under variable costing?

Studdy Solution

STEP 1

1. Variable costing only includes variable production costs in the cost of goods sold.
2. Fixed manufacturing overhead is treated as a period cost under variable costing.
3. Selling and administrative costs are treated as period costs.
4. The company sells each unit at \$25.

STEP 2

1. Calculate total variable production costs.
2. Calculate total fixed costs.
3. Calculate total revenue from sales.
4. Calculate total costs (including variable production costs, fixed costs, and selling/administrative costs).
5. Determine net income under variable costing.

STEP 3

Calculate total variable production costs:
Variable Cost per Unit=$12.00 \text{Variable Cost per Unit} = \$12.00 Units Sold=6,000 \text{Units Sold} = 6,000 Total Variable Production Costs=6,000×12=$72,000 \text{Total Variable Production Costs} = 6,000 \times 12 = \$72,000

STEP 4

Calculate total fixed costs:
Fixed Manufacturing Overhead=$60,000 \text{Fixed Manufacturing Overhead} = \$60,000 Selling and Administrative Costs=$10,000 \text{Selling and Administrative Costs} = \$10,000 Total Fixed Costs=60,000+10,000=$70,000 \text{Total Fixed Costs} = 60,000 + 10,000 = \$70,000

STEP 5

Calculate total revenue from sales:
Selling Price per Unit=$25 \text{Selling Price per Unit} = \$25 Units Sold=6,000 \text{Units Sold} = 6,000 Total Revenue=6,000×25=$150,000 \text{Total Revenue} = 6,000 \times 25 = \$150,000

STEP 6

Calculate total costs:
Total Costs=Total Variable Production Costs+Total Fixed Costs \text{Total Costs} = \text{Total Variable Production Costs} + \text{Total Fixed Costs} Total Costs=72,000+70,000=$142,000 \text{Total Costs} = 72,000 + 70,000 = \$142,000

STEP 7

Determine net income under variable costing:
Net Income=Total RevenueTotal Costs \text{Net Income} = \text{Total Revenue} - \text{Total Costs} Net Income=150,000142,000=$8,000 \text{Net Income} = 150,000 - 142,000 = \$8,000
The net income under variable costing is:
8,000 \boxed{8,000}

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