A manufacturing company that produces a single product has provided the followin
ID: 2399515 • Letter: A
Question
A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:
Selling price -------------------------------------- $126
Units in beginning inventory ------------------- 0
Units produced ---------------------------------- 8,500
Units sold ----------------------------------------- 8,300
Units in ending inventory --------------------- 200
Variable costs per unit:
Direct materials ------------------------------- $36
Direct labor ------------------------------------ $52
Variable manufacturing overhead --------- $2
Variable selling and administrative ------- $9
Fixed costs:
Fixed manufacturing overhead ----------- $127,500
Fixed selling and administrative ---------- 91,300
What is the net operating income for the month under absorption costing?
$5,300
$3,000
($12,700)
$8,300
a.$5,300
b.$3,000
c.($12,700)
d.$8,300
Explanation / Answer
$8,300
Working:
d.$8,300
Working:
Under Absorbtion costing, fixed manufacturing overhead is treated as product cost.It means fixed maufacturing overhead is assigned to each unit. Fixed Manufacturing overhead per unit = $ 1,27,500 / 8,500 = $ 15.00 Now, unit cost of goods sold is calculated as follows: Direct Materials $ 36 Direct Labor $ 52 Variable Manufactturing overhead $ 2 Fixed Manufacturing Overhead $ 15 Cost of goods sold $ 105 Now, Net Operating income is calculated as follows: Per Unit Total Sales $ 126 $ 10,45,800 Cost of goods sold $ 105 $ 8,71,500 Gross Profit $ 21 $ 1,74,300 Selling and admnistrative expense: Variable $ 9.00 $ 74,700 Fixed $ 91,300 Net Operating Income $ 8,300Related Questions
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