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Question
Anchovy, Inc., a producer of frozen pizzas, began operations this year. During this year, the company produced 16,000 cases of pizza and sold 15,000. At year-end, the company reported the following income statement using absorption costing:Sales (15,000 $48) $720,000
Cost of goods sold (15,000 $19) 285,000
Gross margin $435,000
Selling and administrative expenses 79,000
Net income $356,000
Production costs per case total $19, which consists of $15.50 in variable production costs and $3.50 in fixed production costs (based on the 16,000 units produced). Eight percent of total selling and administrative expenses are variable. Compute net income under variable costing.
$356,000 - ($3.50 1,000 units) = $352,500
Answer
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