Farron Corporation, which has only one product, has provided the following data
ID: 2405472 • Letter: F
Question
Farron Corporation, which has only one product, has provided the following data concerning its most recent month of operations Selling price Units in beginning Inventory Units produced Units sold Units In ending Inventory Varlable costs per unit $160 0 9,550 9,150 400 Direct materials Direct labor Varlable manufacturing overhead Variable selling and administrative $30 $72 $18 $22 Fixed costs ing overhead Fixed manufactu Fixed selling and administrative $143,250 $10.000 What is the net operating income for the month under absorption costing? O $36,550 $11.450 O $17450 O $6.000Explanation / Answer
Answers
Working
Variable manufacturing cost per unit
1
Direct material
$ 30.00
2
Direct Labor
$ 72.00
3
Manufacturing overhead
$ 18.00
A = 1+2+3
Total Variable cost per unit
$ 120.00
Fixed manufacturing cost per unit
1
Manufacturing overhead
$ 143,250.00
2
Units produced
9,550
B = 1/2
Overheads per unit
$ 15.00
C = A+ B
Cost of producing 1 unit
$ 135.00
D
Units Sold
9,150
E = C x D
Cost of Goods Sold
$ 1,235,250.00
A = 9150 units x $ 160
Sales
$ 1,464,000.00
B [calculated above]
Cost of Goods Sold
$ 1,235,250.00
C = A - B
Gross Profit
$ 228,750.00
D = 9150 units x $ 22
Variable selling & administrative expenses
$ 201,300.00
E [given]
Fixed Selling & administrative overhead
$ 10,000.00
F = C - D - E
Net Operating Income
$ 17,450.00
Correct Option
Option #3: $ 17,450
Working
Variable manufacturing cost per unit
1
Direct material
$ 30.00
2
Direct Labor
$ 72.00
3
Manufacturing overhead
$ 18.00
A = 1+2+3
Total Variable cost per unit
$ 120.00
Fixed manufacturing cost per unit
1
Manufacturing overhead
$ 143,250.00
2
Units produced
9,550
B = 1/2
Overheads per unit
$ 15.00
C = A+ B
Cost of producing 1 unit
$ 135.00
D
Units Sold
9,150
E = C x D
Cost of Goods Sold
$ 1,235,250.00
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