Bethel,Inc What Is the Operating Income Using Variable Costing If 500

question 33

Multiple Choice

Bethel,Inc.has collected the following data.(There are no beginning inventories.) $$\begin{array} { | l | r | c | } \hline \text { Units produced } & 600 & \text { units } \\\hline \text { Sales price } & \$ 120 & \text { per unit } \\\hline \text { Direct materials } & \$ 10 & \text { per unit } \\\hline \text { Direct labor } & \$ 10 & \text { per unit } \\\hline \text { Variable manufacturing overhead } & \$ 7 & \text { per unit } \\\hline \text { Fixed manufacturing overhead } & \$ 16,400 & \text { per year } \\\hline \text { Variable selling and administrative costs } & \$ 7 & \text { per unit } \\\hline \text { Fixed selling and administrative costs } & \$ 11,700 & \text { per year } \\\hline\end{array}$$ What is the operating income using variable costing if 500 units are sold?

• A) $14,900
• B) $43,000
• C) $48,300
• D) $11,100

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Definitions:

Fixed Costs

Expenses that do not change with the amount of goods or services produced, such as rent, salaries, or insurance.

Variable Cost

Costs that change in proportion to the goods or services that a business produces.

Net Present Value

A method used in capital budgeting to evaluate the profitability of an investment by summing the present values of all cash inflows and outflows associated with the investment.

Tax Credit

A direct reduction of the tax liability, not merely a reduction of taxable income.