Question: Computing variable costing operating income Refer to the information for Concord, Inc.

Requirements:

1. Using variable costing, calculate the unit product cost.
2. Prepare an income statement using the contribution margin format.

Use the following information for Exercises E21-14 and E21-15.

Concord, Inc. has collected the following data for November (there are no beginning inventories):

Units produced and sold 500 units Sales price $ 450 per unit Direct materials 64 per unit Direct labor 68 per unit Variable manufacturing overhead 26 per unit Fixed manufacturing overhead 7,500 per month Variable selling and administrative costs 15 per unit Fixed selling and administrative costs 4,400 per month

Step by step solution

01

Calculation of unit product cost using variable costing (1)

Particulars	Amount
Direct materials	$64
Direct labor	$68
Variable manufacturing overhead	$26
Total unit product cost	$158

02

Income statement using contribution margin format

Particulars	Amount
Net sales revenue ($450x500)	$225,000
Less: Variable costs
Variable cost of goods sold ($158x500)	$79,000
Variable selling and administrative cost ($15x500)	$7,500
Contribution margin	$138,500
Less: Fixed costs
Fixed costs of goods sold	$7,500
Fixed selling and administrative cost	$4,400
Operating Income	$126,600

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