Farron Corporation, which has only one product, has provided the following data

Question

Farron Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $112 Units in beginning inventory 0 Units produced 8,950 Units sold 8,550 Units in ending inventory 400 Variable costs per unit: Direct materials $18 Direct labor $60 Variable manufacturing overhead $6 Variable selling and administrative $10 Fixed costs: Fixed manufacturing overhead $134,250 Fixed selling and administrative $8,800 What is the net operating income for the month under absorption costing?

Explanation / Answer

Absorption costing:

Sales (8550 Units × $112)

957600

Less cost of goods sold:

Beginning inventory

0

Add cost of goods manufactured (8950 Units × 99)

886050

———-

Cost of goods available for sale

886050

Less ending inventory (400 Units × $99)

39600

846450

———-

———-

Gross profit

111150

Less selling and administrative expenses

Fixed

8800

Variable (8550 Units × $10)

85500

94300

———-

———-

16850

———-

Sales (8550 Units × $112)

957600

Less cost of goods sold:

Beginning inventory

0

Add cost of goods manufactured (8950 Units × 99)

886050

———-

Cost of goods available for sale

886050

Less ending inventory (400 Units × $99)

39600

846450

———-

———-

Gross profit

111150

Less selling and administrative expenses

Fixed

8800

Variable (8550 Units × $10)

85500

94300

———-

———-

16850

———-

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