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Hellman's Net Operating Income

Hellman Manufacturing has the following cost information available for 2012:

Direct materials $6.00 per unit
Direct labor $4.00 per unit
Variable manufacturing overhead $2.00 per unit
Variable selling and administrative costs $1.00 per unit
Fixed manufacturing overhead $80,000
Fixed selling and administrative costs $25,000

During 2012, Merriman produced 12,500 units out of which 11,000 units were sold for $60 each.

I need help in answering these questions:
A. Calculate Hellman's net operating income assuming the company uses variable costing.
B. Calculate Hellman's net operating income assuming the company uses absorption costing.

Solution Preview

Solution is also attached.
Steps :
1) First Find Cost of Goods Sold which is Opening Inventory+Manufacturing expenses-Closing Inventory
2) Find Gross Profit= Sales-COGS
3) Find Net Profit= Gross Profit- Other ...

Solution Summary

This solution helps in estimating Hellman's net operating income assuming the company uses variable costing.

$2.19