Reference no: EM132528702

Letcher Corporation manufactures and sells one product. The following information pertains to the company's first year of operations:

Variable costs per unit:

Direct materials $105

Fixed costs per year:

Direct labor $1,255,900

Fixed manufacturing overhead $4,428,700

Fixed selling and administrative expenses $2,273,000

• The company does not have any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, the company produced 66,100 units and sold 63,800 units. The company's only product is sold for $270 per unit.

Question 1: The company is considering using either super-variable costing or a variable costing system that assigns $19 of direct labor cost to each unit that is produced. Which of the following statements is true regarding the net operating income in the first year?

Multiple Choice

Option 1: Variable costing net operating income exceeds super-variable costing net operating income by $154,100.

Option 2: Super-variable costing net operating income exceeds variable costing net operating income by $154,100.

Option 3:Variable costing net operating income exceeds super-variable costing net operating income by $43,700.

Option 4: Super-variable costing net operating income exceeds variable costing net operating income by $43,700.