Question

question 7
calder corporation manufactures and sells one product. the following information pertains to the companys first year of operations:
variable cost per unit:
direct materials $92
fixed costs per year:
direct labor $720,000
fixed manufacturing overhead $3,264,000
fixed selling and administrative $1,935,000
the company doesnt have any variable manufacturing overhead costs or variable selling and administrative costs. during its first year of operations, the company produced 48,000 units and sold 45,000 units. the companys only product sells for $258 per unit.
required:
what is the net operating income?

Explanation:

Step1: Calculate Total Variable Cost of Goods Sold

Variable cost per unit is direct materials cost, which is $92. Units sold are 45,000. So total variable cost of goods sold (COGS) is variable cost per unit times units sold.
$92\times45,000 = 4,140,000$

Step2: Calculate Total Fixed Costs

Fixed costs include direct labor, fixed manufacturing overhead, and fixed selling and administrative. Sum these up:
$720,000 + 3,264,000 + 1,935,000 = 5,919,000$

Step3: Calculate Total Sales Revenue

Selling price per unit is $258, units sold are 45,000. So sales revenue is selling price times units sold.
$258\times45,000 = 11,610,000$

Step4: Calculate Net Operating Income

Net operating income = Sales Revenue - Total Variable COGS - Total Fixed Costs
$11,610,000 - 4,140,000 - 5,919,000 = 1,551,000$

Answer:

1551000