A business operated at 100% of capacity during its first month and incurred the

Question

A business operated at 100% of capacity during its first month and incurred the following costs:

If 1,800 units remain unsold at the end of the month and sales total $1,101,000 for the month, what would be the amount of income from operations reported on the absorption costing income statement?

a.$59,128

b.$217,128

c.$68,128

d.$226,128

Production costs (20,500 units): ??? Direct materials $182,300 ??? Direct labor 238,300 ??? Variable factory overhead 252,800 ??? Fixed factory overhead 102,500 $775,900 Operating expenses: ??? Variable operating expenses $122,100 ??? Fixed operating expenses 45,000 167,100

Explanation / Answer

Calculate net operating income under absorption costing :

so answer is d) $226,128

Sales 1101000 Cost of goods sold (775900/20500*18700) -707772 Gross profit 393228 Operating expense -167100 Net operating income 226128

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