Aces, Inc, a Manufacturer of Tennis Rackets, Began Operations This Year

question 44

Multiple Choice

Aces, Inc., a manufacturer of tennis rackets, began operations this year.The company produced 6,000 rackets and sold 4,900.At year-end, the company reported the following income statement using absorption costing. $\begin{array}{lr}\text { Sales } (4,900 \times \$ 90) &\$ 441,000 \\\text { Cost of goods sold }(4,900 \times \$ 38) &\underline{186,200} \\\text { Gross margin } &\$ 254,800 \\\text { Selling and administrative expenses } &\underline{75,000 }\\\text { Net income } &\underline{\$ 179,800}\end{array}$ Production costs per tennis racket total $38, which consists of $25 in variable production costs and $13 in fixed production costs (based on the 6,000 units produced) .Ten percent of total selling and administrative expenses are variable.Compute net income under variable costing.

• A)$194,100
• B)$165,500
• C)$311,000
• D)$240,500
• E)$233,000

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