Letcher Corporation manufactures and sells one product. The following information pertains to the companys first year of
Question:
Letcher Corporation manufactures and sells one product. The following information pertains to the company’s first year of operations:
Variable costs per unit: | |
---|---|
Direct materials | $ 97 |
Fixed costs per year: | |
Direct labor | $ 976,000 |
Fixed manufacturing overhead | $ 3,660,000 |
Fixed selling and administrative expenses | $ 1,878,400 |
The company does not have any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, the company produced 61,000 units and sold 58,900 units. The company’s only product is sold for $250 per unit.
The company is considering using either super-variable costing or a variable costing system that assigns $16 of direct labor cost to each unit that is produced. Which of the following statements is true regarding the net operating income in the first year?
Variable costing net operating income exceeds super-variable costing net operating income by $126,000.
Super-variable costing net operating income exceeds variable costing net operating income by $126,000.
Variable costing net operating income exceeds super-variable costing net operating income by $33,600.
Super-variable costing net operating income exceeds variable costing net operating income by $33,600.
Financial Reporting and Analysis
ISBN: 978-0078025679
6th edition
Authors: Flawrence Revsine, Daniel Collins, Bruce, Mittelstaedt, Leon