jcourval
Mar 2, 2007, 06:12 AM
Indiana Corporation produces a single product that it sells for $9 per unit. During the first year of operations 100,000 units were produced and 90,000 units were sold.
Manufacturing costs and selling and administrative expenses for the year were as follows:
Fixed Costs Variable Costs
Raw materials -- $1.75 per unit produced
Direct labor -- 1.25 per unit produced
Factory overhead $100,000 .50 per unit produced
Selling and administrative 70,000 0.60 per unit sold
What was Indiana Corporation’s net income for the year using variable costing?
A)$181,000
B)$271,000
C)$281,000
D)$371,000
I believe I am just over thinking this problem. Variable costing by definition includes direct material costs, direct labor costs, and variable manufacturing costs. But, net income is by definition revenues minus expenses. I am know totally confused because I don't know if I need to subtract the fixed costs associated with factory overhead.
Manufacturing costs and selling and administrative expenses for the year were as follows:
Fixed Costs Variable Costs
Raw materials -- $1.75 per unit produced
Direct labor -- 1.25 per unit produced
Factory overhead $100,000 .50 per unit produced
Selling and administrative 70,000 0.60 per unit sold
What was Indiana Corporation’s net income for the year using variable costing?
A)$181,000
B)$271,000
C)$281,000
D)$371,000
I believe I am just over thinking this problem. Variable costing by definition includes direct material costs, direct labor costs, and variable manufacturing costs. But, net income is by definition revenues minus expenses. I am know totally confused because I don't know if I need to subtract the fixed costs associated with factory overhead.