Jean Peck\'s Furniture\'s manufactures tables for hospitality sector. It takes o

Question

Jean Peck's Furniture's manufactures tables for hospitality sector. It takes only bulk orders and each table is sold for

$ 500

after negotiations. In the month of January, it manufactures

3 comma 200

tables and sells

2 comma 600

tables. Actual fixed costs are the same as the amount fixed costs budgeted for the month.

The following information is provided for the month of January:

Variable manufacturing costs

$ 160

per unit

Fixed manufacturing costs

$ 100 comma 000

per month

Fixed Administrative expenses

$ 25 comma 000

per month

At the end of the month Jean Peck's Furniture's has an ending inventory of finished goods of

790

units. The company also incurs a sales commission of

$ 14

per unit. What is the operating income when using absorption costing?

A.$ 802 comma 750

B.$ 741 comma 350

C.$ 777 comma 750

D.$ 766 comma 350

Variable manufacturing costs

$ 160

Explanation / Answer

Variable manufacturing costs 160 Fixed manufacturing costs 31.25 =100000/3200 Unit product cost 191.25 Sales 1300000 =2600*500 Cost of goods sold 497250 =2600*191.25 Gross profit 802750 Selling and administrative expenses 61400 =25000+(2600*14) Net operating income 741350 Option B is correct

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