Tustin Corporation has provided the following data for its two most recent years of operation: Selling price per unit$68 Manufacturing costs: Variable manufacturing cost per unit produced: Direct materials$10 Direct labor$6 Variable manufacturing overhead$4 Fixed manufacturing overhead per year$220,000 Selling and administrative expenses: Variable selling and administrative expense per unit sold$6 Fixed selling and administrative expense per year$61,000 Year 1Year 2 Units in beginning inventory01,000 Units produced during the year11,00010,000 Units sold during the year10,0007,000 Units in ending inventory1,0004,000 The net operating income (loss) under variable costing in Year 1 is closest to:

The net operating income under variable costing is $139,000

Explanation:

                                 Tustin Corporation

            Contribution Margin Income Statement for 1st year

                                                                         Amount

Revenue                                                    $680,000

(10,000 * $68)

Less: Variable Expense

Direct Material =                                             $100,000

(10,000 * $10)

Direct Labor=                                               $60,000

(10,000 * $6)

Variable manufacturing overhead                     $40,000

(10,000 * $4)

Variable selling and administrative                   $60,000  

expense (10,000 * $6)

Contribution                                                       $420,000

Less: Fixed Costs

Fixed Manufacturing overhead                       $220,000

Fixed selling and administrative                         $61,000

overhead  

Net Income                                                           $139,000

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