Faxon Company, which has only one product, has provided the following data conce
ID: 2350617 • Letter: F
Question
Faxon Company, which has only one product, has provided the following data concerning its most recent month of operations:Selling price............................ $137
Units in beginning inventory...... 0
Units produced........................ $3000
Units sold............................... $2900
Units in ending inventory.......... $100
Variable costs per unit:
Direct materials.................. $40
Direct labor........................ $53
Variable manufacturing overhead...... $6
Variable selling and administrative..... $9
Fixed costs:
Fixed manufacturing overhead.............. $69,000
Fixed selling and adminstrative............. $5800
What is the net operating income for the month under absorption costing?
Explanation / Answer
Total Variable costs = 40 + 53 +6 = $99
Revenue ($137 x 2900) 397,300
Less: Production Costs
-Variable Costs (99 x 2900) (287,100)
- Fixed Manufacturing O/H (2900/3000 x 69000) (66,700)
Gross Income 43,500
Less: Variable selling and Administrative (2900 x 9) (26,100)
Less: Fixed selling and Administrative (5,800)
Net Income 11,600
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