Mandolin produced 70,000 units and sold 50,000 units. Their unit selling price is $20 and they have variable unit production costs of $10, variable selling expenses of $3 and fixed overhead of $10,000. Compute Mandolin's net income under variable costing. Multiple choice question. $340,000 $350,000 $450,000 $500,000

$340,000

Explanation:

The computation of the net income under variable costing is shown below;

Sales (50000 × $20)  $1,000,000

Less: Variable costs of production;

Units produced (70000 × $10)  $700,000

Cost of goods available for sale  $700,000

Less: Ending inventory (20000 × $10)  ($200,000)

Cost of goods sold  ($500,000)  

Gross contribution margin  $500,000  

Less: Variable selling expenses (50000 × $3)  ($150000)

Contribution margin  $350,000

Less: Fixed overhead  ($10,000)

Net income  $340,000

Net Income = $340000

Explanation:

Given the total unit produced = 70000

Number of units sold = 50000

Selling price = $20

Variable cost of production = $10

Variable selling expense = $3

Fixed overhead = $10000

Net Income = (50000 x 20) - (50000 x 10) - (50000 x 3) - 10000

Net Income = $340000

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