Caterlebe Productions Uses a Standard Costing System Calculate the Standard Net Operating Income

question 61

Essay

Caterlebe Productions uses a standard costing system. At the end of 2015, the following details are found in their books.
Sales Revenues: $750,000
Cost of Goods Sold (standard costing): $400,500
Marketing & Admin expenses: $150,000
Variances:
$$\begin{array} { | l | r | l | } \hline \text { Sales Revenue } & \$ 6,000 & \text { F } \\\hline \text { Direct Materials Cost Variance } & 400 & \text { U } \\\hline \text { Direct Materials Efficiency Variance } & 375 & \text { F } \\\hline \text { Direct Labor Cost Variance } & 675 & \text { U } \\\hline \text { Direct Labor Efficiency Variance } & 150 & \text { F } \\\hline \text { Variable Overhead Cost Variance } & 250 & \text { U } \\\hline \text { Variable Overhead Efficiency Variance } & 800 & \text { F } \\\hline \text { Fixed Overhead Cost Variance } & 420 & \text { U } \\\hline \text { Fixed Overhead Volume Variance } & 100 & \text { F } \\\hline\end{array}$$ Calculate the standard net operating income.

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Definitions:

Product Cost

The total cost incurred to create a product, encompassing direct materials, direct labor, and overhead costs.

Straight-Line Depreciation

A method of calculating the depreciation of an asset where the cost is evenly spread over its useful life.

Variable Costs

Expenses that vary in relation to the amount of production or business operations.

Cost Concepts

The principles and classifications used to determine the costs of products, services, and activities, enabling businesses to analyze profitability.