Aces, Inc, a Manufacturer of Tennis Rackets, Began Operations This Year

Multiple Choice

Aces, Inc., a manufacturer of tennis rackets, began operations this year. The company produced 6,000 rackets and sold 4,900. At year-end, the company reported the following income statement using absorption costing.
$\begin{array}{lr}\text { Sales }(4,900 \times \$ 90) & \$ 441,000 \\\text { Cost of goods sold }(4,900 \times \$ 38) & 186,200 \\\text { Gross margin } & \$ 254,800 \\\text { Selling and administrative } & 75,000\\\text { expenses }\\\text { Net Income }&\$179,800\end{array}$
Production costs per tennis racket total $38, which consists of $25 in variable production costs and $13 in fixed production costs (based on the 6,000 units produced) . Ten percent of total selling and administrative expenses are variable. Compute net income under variable costing.

A) $194,100
B) $165,500
C) $311,000
D) $240,500
E) $233,000