Murie Corporation makes one product and has provided the fol

Murie Corporation makes one product and has provided the following information:

Budgeted selling price per unit $ 98 per unit sold

Budgeted unit sales, February 11,000 units

Raw materials requirement per unit of output 5 pounds

Raw materials cost $ 3.00 per pound

Direct labor requirement per unit of output 2.5 direct labor-hours

Direct labor wage rate $ 18.00 per direct labor-hour

Predetermined overhead rate (all variable) $ 11.00 per direct labor-hour

Variable selling and administrative expense $ 2.70 per unit sold

Fixed selling and administrative expense $ 80,000 per month

The estimated net operating income (loss) for February is closest to:

A) $5,800 B) $35,500 C) $42,000 D) $85,800

Solution

Sales (11000*98) 1078000 less Direct materials (11000*5*3) 165000 Direct labor (11000*2.5*18) 495000 variable overhead (11000*2.5*11) 302500 Variable selling & adm (11000*2.7) 29700 Fixed selling & adm expense 80000 -1072200 Net operating income 5800 option A $5,800