A manufacturing company that produces a single product has provided the followin
ID: 2399558 • Letter: A
Question
A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:
Selling price -------------------------------------- $126
Units in beginning inventory ------------------- 0
Units produced ---------------------------------- 8,500
Units sold ----------------------------------------- 8,300
Units in ending inventory --------------------- 200
Variable costs per unit:
Direct materials ------------------------------- $36
Direct labor ------------------------------------ $52
Variable manufacturing overhead --------- $2
Variable selling and administrative ------- $9
Fixed costs:
Fixed manufacturing overhead ----------- $127,500
Fixed selling and administrative ---------- 91,300
What is the net operating income for the month under absorption costing?
$5,300
$3,000
($12,700)
$8,300
a.$5,300
b.$3,000
c.($12,700)
d.$8,300
Explanation / Answer
Answer:
Net operating income for the month under absorption costing =$8300
Working notes for the above answer is as under :
Unit product cost under absorption costing:
Direct materials
36
Direct labor
52
Variable manufacturing overhead
2
Fixed manufacturing overhead cost
($127500 ÷ 8500 units produced)
15.0
Absorption costing unit product cost
105
Sales ($126per unit × 8300 units)
1045800
Cost of goods sold
($105 per unit × 8300 units)
871500
Gross margin 425,500
174300
Selling and administrative expenses
($9 per unit × 8300 units + $91,300)
166000
Net operating income
8300
Net operating income for the month under absorption costing =$8300
Direct materials
36
Direct labor
52
Variable manufacturing overhead
2
Fixed manufacturing overhead cost
($127500 ÷ 8500 units produced)
15.0
Absorption costing unit product cost
105
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