Question

Aces, Inc., a manufacturer of tennis rackets, began operations this year. The company produced 6,000 rackets and sold 4,900. At year-end, the company reported the following income statement using absorption costing.
Sales (4,900 $90) $441,000
Cost of goods sold (4,900 $38) 186,200
Gross margin $254,800
Selling and administrative expenses 75,000
Net Income $179,800
Production costs per tennis racket total $38, which consists of $25 in variable production costs and $13 in fixed production costs (based on the 6,000 units produced). Ten percent of total selling and administrative expenses are variable. Compute net income under variable costing.
A. $194,100
B. $165,500
C. $311,000
D. $240,500
E. $233,000

Answer

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