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Khidir Company, which has only one product, has provided the following data conc

ID: 2470788 • Letter: K

Question

Khidir Company, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $121 Units in beginning inventory 300 Units produced 3,200 Units sold 3,400 Units in ending inventory 100 Variable costs per unit: Direct materials $45 Direct labor $45 Variable manufacturing overhead $1 Variable selling and administrative $7 Fixed costs: Fixed manufacturing overhead $70,400 Fixed selling and administrative $6,800 The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month.

show your work

9. What is the net operating income for the month under absorption costing? A) ($3,400) B) $19,200 C) $1,000 D) $2,200

Explanation / Answer

Particulars

Amount

Sales

121 x 3400

$          411,400

Less: Cost of Goods Sold

Begining Stock

113 x 300

$          33,900

+ Cost of Goods Produced

$        361,600

- Ending Stock

113 x 100

$        (11,300)

$          384,200

Gross Profit

$             27,200

Selling & Distribution Expenses

Variable Selling & Distribution Expenses

7x3400

$          23,800

Fixed Selling & Distribution Expenses

$            6,800

$             30,600

Net operating Income

$             (3,400)

The net operating income for the month under absorption costing A) is ($ 3,400)

Working notes:

No of units in Ending Inventory= Beginning Inventory + No of units produced – No of units sold

                                                      =300+3200-3400=100 units

Computation of beginning inventory, ending inventory and cost of goods sold.

Variable manufacturing overhead

Direct material                                          $ 45

Direct labor                                               $ 45

Manufacturing overhead                       $ 1

                                                          --------------

Total manufacturing overhead                 91   x 32,000 = $ 291,200

+ Manufacturing factory overhead                                   $ 70,400

                                                                                 ----------------------

                                                                                       $ 361,600

Cost per unit = $ 361,600/3,200 = $113

Particulars

Amount

Sales

121 x 3400

$          411,400

Less: Cost of Goods Sold

Begining Stock

113 x 300

$          33,900

+ Cost of Goods Produced

$        361,600

- Ending Stock

113 x 100

$        (11,300)

$          384,200

Gross Profit

$             27,200

Selling & Distribution Expenses

Variable Selling & Distribution Expenses

7x3400

$          23,800

Fixed Selling & Distribution Expenses

$            6,800

$             30,600

Net operating Income

$             (3,400)