Khidir Company, which has only one product, has provided the following data conc
ID: 2470788 • Letter: K
Question
Khidir Company, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $121 Units in beginning inventory 300 Units produced 3,200 Units sold 3,400 Units in ending inventory 100 Variable costs per unit: Direct materials $45 Direct labor $45 Variable manufacturing overhead $1 Variable selling and administrative $7 Fixed costs: Fixed manufacturing overhead $70,400 Fixed selling and administrative $6,800 The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month.
show your work
9. What is the net operating income for the month under absorption costing? A) ($3,400) B) $19,200 C) $1,000 D) $2,200
Explanation / Answer
Particulars
Amount
Sales
121 x 3400
$ 411,400
Less: Cost of Goods Sold
Begining Stock
113 x 300
$ 33,900
+ Cost of Goods Produced
$ 361,600
- Ending Stock
113 x 100
$ (11,300)
$ 384,200
Gross Profit
$ 27,200
Selling & Distribution Expenses
Variable Selling & Distribution Expenses
7x3400
$ 23,800
Fixed Selling & Distribution Expenses
$ 6,800
$ 30,600
Net operating Income
$ (3,400)
The net operating income for the month under absorption costing A) is ($ 3,400)
Working notes:
No of units in Ending Inventory= Beginning Inventory + No of units produced – No of units sold
=300+3200-3400=100 units
Computation of beginning inventory, ending inventory and cost of goods sold.
Variable manufacturing overhead
Direct material $ 45
Direct labor $ 45
Manufacturing overhead $ 1
--------------
Total manufacturing overhead 91 x 32,000 = $ 291,200
+ Manufacturing factory overhead $ 70,400
----------------------
$ 361,600
Cost per unit = $ 361,600/3,200 = $113
Particulars
Amount
Sales
121 x 3400
$ 411,400
Less: Cost of Goods Sold
Begining Stock
113 x 300
$ 33,900
+ Cost of Goods Produced
$ 361,600
- Ending Stock
113 x 100
$ (11,300)
$ 384,200
Gross Profit
$ 27,200
Selling & Distribution Expenses
Variable Selling & Distribution Expenses
7x3400
$ 23,800
Fixed Selling & Distribution Expenses
$ 6,800
$ 30,600
Net operating Income
$ (3,400)
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