Corporation has provided the following cost data for last year when 100,000 units were produced Raw materials:...

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Finance

Corporation has provided the following cost data for last yearwhen 100,000 units were produced
Raw materials: $200,000
Direct Labor: $100,000
Manufacturing Overhead: $200,000
Sell & Admin Expense: $150,000
All costs are variable except for $100,000 of manufacturingoverhead and $100,000 sell & admin expense. There are nobeginning or ending inventories.
If the selling price is $10 per unit, the net operationincome from producing and selling 110,000 units wouldbe:
A) $560,000
B) $385,000
C) $405,000
D) $450,000

Answer & Explanation Solved by verified expert

4.2 Ratings (595 Votes)

C) $405,000

Step-1:Calculation of variable cost per unit at 100,000 units

	Total variable costs	Total units	Variable Cost per unit
	a	b	c=a/b
Raw materials	$ 2,00,000	1,00,000	$ 2.00
Direct Labor	$ 1,00,000	1,00,000	$ 1.00
Manufacturing Overhead	$ 1,00,000	1,00,000	$ 1.00
Sell & Admin Expense	$ 50,000	1,00,000	$ 0.50





Note:

Variable cost per unit remains same and fixed costs in total remains same.

Step-2:Calculation of net operation income from producing and selling 110,000 units

			Per Unit	Total
	Sales		$ 10.00	$ 11,00,000
	Variable costs:
	Raw materials		$ 2.00	$ 2,20,000
	Direct Labor		$ 1.00	$ 1,10,000
	Manufacturing Overhead		$ 1.00	$ 1,10,000
	Sell & Admin Expense		$ 0.50	$ 55,000
	Contribution Margin		$ 5.50	$ 6,05,000
	Fixed Costs:
	Manufacturing Overhead			$ 1,00,000
	Sell & Admin Expense			$ 1,00,000

	Net Operation income			$ 4,05,000

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Transcribed Image Text

Corporation has provided the following cost data for last yearwhen 100,000 units were producedRaw materials: $200,000Direct Labor: $100,000Manufacturing Overhead: $200,000Sell & Admin Expense: $150,000All costs are variable except for $100,000 of manufacturingoverhead and $100,000 sell & admin expense. There are nobeginning or ending inventories.If the selling price is $10 per unit, the net operationincome from producing and selling 110,000 units wouldbe:A) $560,000B) $385,000C) $405,000D) $450,000