Tim's Tools, a manufacturer of cordless drills, began operations this year. During this year, the company produced 20,000 units and sold 18,000 units. At year-end, the company reported the following income statement using absorption costing:Sales (18,000 × $30)$540,000 Cost of goods sold (18,000 × $14) 252,000 Gross margin$288,000 Selling and administrative expenses 90,000 Net income$198,000 Production costs per unit total $14, which consists of $12.90 in variable production costs and $1.10 in fixed production costs (based on the 20,000 units produced). 60% of total selling and administrative expenses are variable. Compute net income under variable costing.
A. $288,000
B. $307,800
C. $198,000
D. $195,800
E. $220,000
Answer: D
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