A manufacturing company that produces a single product has provided the followin

Question

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:

What is the net operating income for the month under absorption costing?

Selling price $112 Units in beginning inventory 0 Units produced 5,500 Units sold 5,300 Units in ending inventory 200 Variable costs per unit:      Direct materials $33      Direct labor $37      Variable manufacturing overhead $5     Variable selling and administrative $6 Fixed costs:    Fixed manufacturing overhead $71,500    Fixed selling and administrative $79,500

Explanation / Answer

Net operating income for the month under absorption costing is:

Absorption Costing Income Statement For the Year Ended 20XX Particulars Units Rate Amount ($) Sales 5,300.00 112.00 593,600.00 Less: Cost of goods sold:    Direct Material 5,300.00 33.00 174,900.00    Direct Labour 5,300.00 37.00 196,100.00    Variable manufacturing overhead 5,300.00 5.00 26,500.00    Annual fixed manufacturing overhead 5,300.00 13.00 68,900.00 Gross Profit 127,200.00 Less: Selling and administrative expenses    Variable selling expenses 5,300.00 6.00 31,800.00    Fixed selling and administrative expense 79,500.00 Net operating Profit/loss 15,900.00

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