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Question
Wind Fall, a manufacturer of leaf blowers, began operations this year. During this year, the company produced 10,000 leaf blowers and sold 8,500. At year-end the company reported the following income statement using absorption costing:Sales (8,500 $45) $382,500
Cost of goods sold (8,500 $20) 170,000
Gross margin $212,500
Selling and administrative expenses 60,000
Net income $152,500
Production costs per leaf blower total $20, which consists of $16 in variable production costs and $4 in fixed production costs (based on the 10,000 units produced). Fifteen percent of total selling and administrative expenses are variable. Compute net income under variable costing.
A. $146,500
B. $158,500
C. $237,500
D. $206,500
E. $246,500
Answer
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