All costs are variable except for 100000 of manufacturing ov

All costs are variable except for $100,000 of manufacturing overhead and $100,000 of selling and administrative expense. There are no beginning or ending inventories. If the selling price is $10 per unit, the net operating income from producing and selling 110,000 units would be:

$450,000

$385,000

$405,000

$560,000

		$450,000
		$385,000
		$405,000
		$560,000

Raw material $200,000 SI00,000 $200,000

Solution

ANSWER:

FIXED COST:

Particulars

Amount

Manufacturing Overhead

100000

Selling and administrative expense

100000

Total

200000

VARIABLE COST (AT 100000 OUTPUTS):

Particulars

Amount

Per unit

Raw materials

200000

0.5

Direct labor

100000

1

Manufacturing Overhead

100000

1

Selling and administrative expense

50000

2

Total

450000

4.5

OPERATING INCOME (AT 110000 OUTPUT)

Particulars

Per unit

Amount

Sales (110000 * 10)

10

1100000

Less Fixed Cost:

Manufacturing Overhead

100000

Selling and administrative expense

100000

Less Variable cost:

Raw materials

0.5

55000

Direct labor

1

110000

Manufacturing Overhead

1

110000

Selling and administrative expense

2

220000

OPERATING INCOME

405000

Particulars	Amount
Manufacturing Overhead	100000
Selling and administrative expense	100000
Total	200000