A business operated at 100% of capacity during its first month, with the following results:Sales (104 units) $520,000Production costs (130 units): Direct materials$65,000 Direct labor16,250 Variable factory overhead29,250 Fixed factory overhead26,000136,500Operating expenses: Variable operating expenses$5,970 Fixed operating expenses4,0009,970The amount of contribution margin that would be reported on the variable costing income statement isa. $519,870b. $510,030c. $421,630d. $425,630

The contribution margin is calculated by subtracting all variable expenses from revenue in a…

Answered: A business operated at 100% of capacity…

A business operated at 100% of capacity during its first month, with the following results: Sales (104 units) $520,000 Production costs (130 units): Direct materials $65,000 Direct labor

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

A business operated at 100% of capacity during its first month, with the following results:

Sales (104 units)		$520,000
Production costs (130 units):
Direct materials	$65,000
Direct labor	16,250
Variable factory overhead	29,250
Fixed factory overhead	26,000	136,500
Operating expenses:
Variable operating expenses	$5,970
Fixed operating expenses	4,000	9,970

The amount of contribution margin that would be reported on the variable costing income statement is

a. $519,870

b. $510,030

c. $421,630

d. $425,630

Definition Definition Indirect costs incurred while producing goods or services. Overhead costs cannot be directly attributed to products or services. Overhead includes indirect material cost, indirect labor cost, rent, utilities expenses, and depreciation. Since these costs directly affect the profitability of a company, managing overhead becomes an important task for management.

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