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

question 14

Multiple Choice

Bethel, Inc. has collected the following data. (There are no beginning inventories.) $$\begin{array} { | l | r | l | } \hline \text { Units produced } & 530 & \text { units } \\\hline \text { Sales price } & \$ 140 & \text { per unit } \\\hline \text { Direct materials } & \$ 17 & \text { per unit } \\\hline \text { Direct labor } & \$ 13 & \text { per unit } \\\hline \text { Variable manufacturing overhead } & \$ 10 & \text { per unit } \\\hline \text { Fixed manufacturing overhead } & \$ 19,200 & \text { per year } \\\hline \text { Variable selling and administrative costs } & \$ 10 & \text { per unit } \\\hline \text { Fixed selling and administrative costs } & \$ 10,000 & \text { per year } \\\hline\end{array}$$ What is the operating income using variable costing if 500 units are sold?

• A) $15,800
• B) $45,000
• C) $60,000
• D) $4200

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Definitions:

Current Assets

Items that are likely to be cashed in, sold off, or used up within one year or during the usual operating period of a company.

Indirect Method

An approach used in cash flow statements to adjust net income for non-cash transactions and changes in working capital to calculate operating cash flow.

Operating Activities

Activities that constitute the primary or main activities of a business, including the production, sale, and delivery of its products and services.

Direct Method

A way of preparing the cash flow statement in which actual cash receipts and payments are reported, rather than adjusting net income for changes in non-cash accounts.