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Question
Fields Cutlery, a manufacturer of gourmet knife sets, produced 20,000 sets and sold 23,000 units during the current year. Beginning inventory under absorption costing consisted of 3,000 units valued at $66,000 (Direct materials $12 per unit; Direct labor, $3 per unit; Variable Overhead, $2 per unit, and Fixed overhead, $5 per unit.) All manufacturing costs have remained constant over the 2-year period. At year-end the company reported the following income statement using absorption costing:Sales (23,000 $45) $1,035,000
Cost of goods sold (23,000 $22) 506,,000
Gross margin $529,000
Selling and administrative expenses 115,000000
Net income $414,000
60% of total selling and administrative expenses are variable. Compute net income under variable costing.
A. $414,000
B. $399,000
C. $529,000
D. $429,000
E. $644,000
Answer
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