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29 September, 15:43

Product sales: 1,000 units at $10 eachVariable manufacturing costs: $5.50 per unitFixed manufacturing overhead: $1,200Variable selling and administrative costs: $.50 per unit soldFixed selling and administrative costs: $1,000No beginning inventoryUnits produced: 1,200Casey's operating income under variable (direct) costing isA.$700B.$2,300C.$1,800D.$600

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  1. 29 September, 16:02
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    The correct answer to the following question is option C) $1800.

    Explanation:

    Given information -

    Product sales - 1000 units

    Sales price - $10

    Variable manufacturing cost - $5.50 per unit

    Fixed manufacturing overhead - $1200

    Variable selling and administrative costs - $.50 per unit

    Fixed selling and administrative cost - $1000

    Units produced - 1200 units

    Manufacturing contribution per unit = Sales price per unit - Variable

    manufacturing cost per unit

    = $10 - $5.50

    = $4.50

    Manufacturing contribution margin -

    Number of units sold x manufacturing contribution per unit

    = 1000 x $4.50

    = $4500

    While the contribution margin per unit -

    $4.50 - $.50

    = $4

    which means the total contribution margin would be 1000 x $4

    = $4000

    And now subtracting Fixed manufacturing overhead and Fixed selling and administrative costs from the total contribution margin to get the operating income -

    $4000 - $1200 - $1000

    = $1800
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