During the most recent year, Osterman Company had the following data: 1. Calcula

Question

During the most recent year, Osterman Company had the following data:

1. Calculate the cost of goods sold under absorption costing.

The cost of goods sold under the absorption costing method is

2. Prepare an income statement using absorption costing. Refer to the list of Amount Descriptions for the exact wording of text items within your income statement.

Units in beginning inventory --- Units produced 11,600 Units sold ($48 per unit) 9,000 Variable costs per unit: Direct materials $9 Direct labor $7 Variable overhead $3 Fixed costs: Fixed overhead per unit produced $5 Fixed selling and administrative $137,500

Explanation / Answer

Answer Part 1

Per unit product cost under absorption costing:

Direct materials + Direct labor + Variable overhead + Fixed overhead per unit produced

= $9 +$7+$3+$5 = $24

Cost of goods sold under absorption costing.= Units sold * Per unit product cost under absorption costing:  

= 9,000 units * $24 = $216,000

Answer Part 2

Income statement using absorption costing

Paticular Amount ($) Sales (9,000 units * $48) 432,000 Less :Cost of goods sold (216,000) Gross Profit 216,000 Less : Fixed selling and administrative (137,500) Operating Income 78,500

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