Advanced Company reports the following information for the current year. All beg

Question

Advanced Company reports the following information for the current year. All beginning inventory amounts equaled $0 this year. Units produced this year 37,000 units Units sold this year 22,200 units Direct materials $21 per unit Direct labor $23 per unit Variable overhead $111,000 in total Fixed overhead $185,000 in total 1) Given Advanced Company's data, and the knowledge that the product is sold for $73 per unit and operating expenses are $320,000, compute the net income under absorption costing. 2) Given Advanced Company's data, compute cost of finished goods in inventory under absorption costing.

Explanation / Answer

Advanced Company   Units statement   Opening Inventory                         -   Production units               37,000 Units sold               22,200 Closing inventory               14,800 Production Cost by Absorption costing   Details Per unit $ Total $ Direct Materials                  21.00        777,000 Direct labor                  23.00        851,000 Variable overhead                    3.00        111,000 Fixed overhead                    5.00        185,000 Total Cost of Prodcution                    52.00    1,924,000 Less Cost of Closing stock @$52 for 14800 units=      (769,600) Cost Of Goods Sold    1,154,400      1 Advanced Company   Income Statement   Using Absorption costing Details Per unit $ Total $ Sales Revenue                        73    1,620,600 Less Cost of Goods Sold                        52    1,154,400 Gross Profit          466,200 Operating Expenses        320,000 Net Income          146,200      2 Cost of Finished Goods in Inventory =14800*52=             769,600

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