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A firm operated at 90% capacity for the past year, during which fixed costs were $320,000,...

Question:

A firm operated at 90% capacity for the past year, during which fixed costs were $320,000, variable costs were 60% of sales, and sales were $1,000,000.

Income from Operations was:

a. $680,000.

b. $80,000.

c. $1,320,000.

d. $200,000.

Methods for Costing:

There are many methods have been developed for finding the cost of goods produced i.e. traditional costing method, absorption-based costing, and variable costing. Each method has different uses which are applied according to the production process developed by the companies.

Answer and Explanation:

The correct answer is option (b).

Income from Operations was $80,000.

Explanation: Income from Operations was $80,000 ($1,000,000 - $1,000,000 x 60% - $320,000), which has been computed byd deducting the variable costs and the fixed cost from the sales revenue.


Learn more about this topic:

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Variable Costing: Method, Formula & Advantages

from Financial Accounting: Help and Review

Chapter 13 / Lesson 5
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