Advanced Company reports the following information for the current year. All beginning inventory amounts equaled $0 this year. Units produced this year 28,000 units Units sold this year 16,800 units Direct materials $ 12 per unit Direct labor $ 14 per unit Variable overhead $ 3 per unit Fixed overhead $ 140,000 in total Given Advanced Company's data, and the knowledge that the product is sold for $59 per unit and operating expenses are $230,000, compute the net income under variable costing.

Net Income   =  $134,000

Explanation:

Under the variable costing method, cost are classified by their behaviour in fixed cost and variable cost.

The operating income of Advanced Company would be computed as follows:

                                                            $

Sales revenue   - (16,800 ×59)=      991,200

Variable costs :

(12 +14+3) × 16,800                 =       (487,200)

Contribution                                      504,000

Fixed overhead                                 (140,000)

Operating expense                          (230,000)

Net Income                                         134,000

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