Nato Company was organized a year ago. The results of the company's first year of operations using the absorption costing method follow: Sales (40,000 units @ P33.75), P1,350,000; Cost of goods manufactured (500,000 units @21), P210,000; Selling &
Nato Company was organized a year ago. The results of the company's first year of operations using the absorption costing method follow: Sales (40,000 units @ P33.75), P1,350,000; Cost of goods manufactured (500,000 units @21), P210,000; Selling & administrative expenses, P420,000; Net Operating Income, P90,000. The company's selling and administrative expenses consists of P300,000 per year in fixed expenses and P3.00 per unit sold in variable expenses. The product cost of P21 is computed as follows: Direct materials- P10.00; Direct labor-4.00; Variable manufacturing overhead- P2.00; Fixed manufacturing overhead (P250,000/50,000) - P5.00. Compute for the operating income under variable costing.
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