Question 32

XYZ Inc. sells a single product for $25 per unit. Direct materials costs were $5 per unit, while direct labour and variable overhead costs were $3 and $2 respectively. Fixed overhead costs amount $20,000 per month. The company has a practical production capacity of 5,000 units per month. Variable selling costs are $2 per unit. Fixed selling costs are $2,000 per month. Last month, the company produced 5,000 units and sold 3,000 units. What is the company's operating income using variable costing?