Hi, I am trying to understand how they got the answer for this problem? Use the

Question

Hi,

I am trying to understand how they got the answer for this problem?  

Use the following data to answer the question

Using absorption costing, what is the net income in January if each unit sells for $3600?

Use the following data to answer the question

January February March Unit Data       Beginning Inventory 0       ?       ?       Production 1300 700 1000       Sales 600 800 1000 variable costs       manufacturing cost per unit $900 $900 $900       marketing cost per unit sold $600 $600 $600 Fixed costs    Manufacturing costs $450,000 $450,000 $450,000    Marketing costs $140,000 $140,000 $140,000

Using absorption costing, what is the net income in January if each unit sells for $3600?

Correct Answer: 912,308 I am trying to understand how they got the answer for this problem?

Explanation / Answer

Manufacturing costs for 1300 units = 450,000

Manufacturing costs for 600 units sold= 450,000/1300*600 =$2,07,692.31

All the Fixed Marketing costs will be counted as it was related to sales

No of units sold = 600

Net income = Sales - Variable Cost - Fixed Cost

=600*3600 -1500*600-2,07,692.31-140000 =$912,308

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