Answer:
Net income for 2010 using direct costing is $114,000.
Explanation:
The selling price is $20.
10,000 units of product were sold.
The sales revenue
= [tex]10,000\ \times\ \$ 20[/tex]
= $200,000
Total variable manufacturing cost
= [tex]Variable\ manufacturing\ cost\ per\ unit\ \times\ number\ of\ units\ produced[/tex]
= [tex]12,000\ \times\ \$ 4[/tex]
= $48,000
Fixed manufacturing costs are $24,000.
Total variable administrative cost
= [tex]Variable\ administrative\ cost\ per\ unit\ \times\ number\ of\ units\ produced[/tex]
= [tex]10,000\ \times\ \$ 2[/tex]
= $20,000
Fixed selling and administrative costs are $6,000.
Ending stock
= [tex]\frac{Total\ manufacturing\ cost\ \times\ Inventory}{Total\ units\ produced}[/tex]
= [tex]\frac{(48,000\ +\ 24,000 )\ \times\ 2,000}{12,000}[/tex]
= [tex]\frac{144,000,000}{12,000}[/tex]
= $12,000
Net income
= Total revenue - (Manufacturing costs - ending stock) - Administrative costs
= $200,000 - ($48,000 + $24,000) - $12,000) - ($20,000 + $6,000)
= $200,000 - $60,000 - $26,000
= $114,000
