A business operated at 100% of capacity during its first month, with the followi
ID: 2586588 • Letter: A
Question
A business operated at 100% of capacity during its first month, with the following results: Sales (97 units) $5,335 Production costs (121 units): Direct materials $739 Direct labor 189 Variable factory overhead 330 Fixed factory overhead 315 1,573 Operating expenses: Variable operating expenses $530 Fixed operating expenses 371 901 What is the amount of the income from operations that would be reported on the absorption costing income statement? Select the correct answer. a)$3,173 b) $3,426 c) $3,797 d)$5,214
Explanation / Answer
Answer is A. $ 3,173
The explanation is as follows:
Cost of Goods manufactured under Absorption costing: Direct Material 739 Direct labour 189 Variable Factory Overheads 330 Fixed Factory Overheads 315 Total Cost of Goods manufactured 1573 (for production of 121 units Cost of goods manufactured per unit 13 per unit (1573/121) StateMent of Income Sales Revenue (97 units) 5335 Less: Cost of Goods sold (97 units@ 13) 1261 Gross Income 4074 Less: Operating expense Variable operating expense 530 Fixed Operating expense 371 Net operating income 3173Related Questions
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