80.2K

Verified Solution

Link Copied!

Making Company manufactures one product that is sold for $55 per unit in two geographic regionsthe South and North regions. The following information pertains to the companys first year of operations in which it produced 20,000 units and sold 17,500 units.

Variable costs per unit:

Manufacturing:

Direct materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12

Direct labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7

Variable manufacturing overhead. . . . . . . . . . . . . . . . . . . . $1

Variable selling and administrative. . . . . .. . . . . . . . . . . . . . . $2

Fixed costs per year:

Fixed manufacturing overhead. . . . . . . . . . . . . . . . . . . . . . . $400,000

Fixed selling and administrative expenses. . . . . . . . . . . . . . . . $248,000

The company sold 12,500 units in the South region and 5,000 units in the North region. It determined that $125,000 of its fixed selling and administrative expenses is traceable to the North region, $75,000 is traceable to the South region, and the remaining $48,000 is a common fixed cost. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product.

Required:

What is the companys total contribution margin under variable costing?

What is the companys net operating income under variable costing?

Answer & Explanation Solved by verified expert

See Answer