Wind Fall, a manufacturer of leaf blowers, began operations this year. During this year, the company produced 10,000 leaf blowers and sold 8,500. At year-end the company reported the following income statement using absorption costing.
- Sales (8,500 x $45) 382,500
- cost of goods sold (8,500 x $20) 170,000
- gross margin $212,500
- selling and administrative expenses 60,000
- net income $152,500
Production costs per leaf blower total $20, which consists of $16 in variable production costs and $4 in fixed production costs (based on the 10,000 units produced). Fifteen percent of total selling and administrative expenses are variable.
Compute net income under variable costing.
- $146,500
- $158,500
- $237,500
- $206,500
- $246,500