Answer:
Instructions are below.
Explanation:
Giving the following information:
Shamrock Inc. plans to sell 3,000 Irish sweaters for $200 each in the coming year.
Product costs include:
Direct materials per sweater= $40
Direct labor per sweater= $10
Variable overhead per sweater= $15
Total fixed factory overhead= $20,000
Variable selling expenses are $5 per sweater
Fixed selling and administrative expenses total $12,000.
Under the variable costing method, the unitary production cost is calculated using the direct labor, direct material, and variable allocated overhead.
In this case we are asked to calculate the total variable cost, we will include the administrative expense:
Unitary variable cost= 40 + 10 + 15 + 5= $70
Total fixed costs= fixed overhead + fixed selling and administrative expense
Total fixed cost= 20,000 + 12,000= $32,000
Income statement:
Sales= 3,000*200= 600,000
Variable cost= 3,000*70= (210,000)
Contribution margin= 390,000
Total fixed cost= (32,000)
Net operating income= 358,000
