Alvarez Company's break-even point in units is 1,650. The sales price per unit is $12 and variable cost per unit is $10. If the company sells 3,800 unit what will net income be? Multiple Choice $4,300 $7,600 $3,000. $65,400 $36,300
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
![**Alvarez Company's Net Income Calculation**
*Problem Statement:*
Alvarez Company's break-even point in units is 1,650. The sales price per unit is $12 and the variable cost per unit is $10. If the company sells 3,800 units, what will the net income be?
*Multiple Choice Options:*
- $4,300
- $7,600
- $3,000
- $65,400
- $36,300
*Explanation:*
To calculate the net income, we first need to determine the contribution margin per unit, which is the sales price per unit minus the variable cost per unit.
\[ \text{Contribution Margin per Unit} = \$12 - \$10 = \$2 \]
Next, calculate the total contribution margin for 3,800 units:
\[ \text{Total Contribution Margin} = 3,800 \times \$2 = \$7,600 \]
Net income is the total contribution margin minus the fixed costs. Since the break-even point is where total contribution equals fixed costs, the fixed costs can be calculated as:
\[ \text{Fixed Costs} = 1,650 \times \$2 = \$3,300 \]
Finally, net income is:
\[ \text{Net Income} = \$7,600 - \$3,300 = \$4,300 \]
*Correct Answer: $4,300*](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff0e6a15e-8923-4b70-967c-767e9181f633%2F045aedf6-fbe0-4332-92a7-2f977e88aef6%2F634qf2_processed.jpeg&w=3840&q=75)
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