Question Content AreaA business operated at 100% of capacity during its first month and incurred the following costs:Production costs (18,300 units): Direct materials $181,400 Direct labor 220,000 Variable factory overhead 262,100 Fixed factory overhead 91,100 $754,600Operating expenses: Variable operating expenses $121,400 Fixed operating expenses 45,100 166,500If 1,600 units remain unsold at the end of the month and sales total $1,054,000 for the month, what would be the amount of income from operations reported on the variable costing income statement?a.$58,011b.$191,025c.$65,976d.$80,533

The amount of income from operations reported on the variable costing income statement can be calculated by using the formula which is Income from Operations = Gross Margin – Variable Operating Expenses – Fixed Operating Expenses

Calculate total production costs.

Total production costs = $754,600

Calculate the cost of goods sold (COGS).

COGS = Total production costs ÷ Total number of units produced

COGS = $754,600 ÷ 18,300

COGS = $41.22 per unit

Calculate inventory at end of the month.

Inventory = Number of units unsold × Cost per unit

Inventory = 1,600 × $41.22

Inventory = $66,352

Calculate gross margin.

Gross Margin = Total Sales Revenue – Cost of Goods Sold

Gross Margin = $1,054,000 – (18,300 × $41.22)

Gross Margin = $1,054,000 – $754,600

Gross Margin = $299,400

Calculate income from operations.

Income from Operations = Gross Margin – Variable Operating Expenses – Fixed Operating Expenses

Income from Operations = $299,400 – $121,400 – $45,100

Income from Operations = $133,900 – $66,352

Income from Operations = $67,548

Therefore, the amount of income from operations reported on the variable costing income statement is $67,548.

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