Question

Freshmart, Inc., began the year with 250 units of inventory at a cost of $55 per unit using variable costing, produced 1,000 units, and sold 1,250 units at a selling price of $100 per unit. Fixed overhead costs totaled $30,000 and fixed selling and administrative expenses were $15,000. Variable production costs were $25.00 per unit while variable selling and administrative expenses were $10.00 per unit. Using variable costing, net income was:

Answer 1

The net income will be "$36,250".

Step-by-step explanation:

The given values are:

Administrative expenses

= $15,000

Fixed overhead costs

= $30,000

According to the question:

The sales will be:

=
`1250 \ units* 100 \ per \ units`

=
`125000`

The production cost of the variable will be:

=
`1250 \ units * 25 \ per \ units`

=
`31250`

Variable selling will be:

=
`1250 \ units* 10 \ per \ units`

=
`12500`

The net income will be:

⇒
`Sales-Production \ cost \ of \ variable-admin \ expenses-fixed \ costs-fixed \ selling`

On substituting the values, we get

⇒
`125000-31250-12500-30000-15000`

⇒
`36250` ($)