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:

Farron Corporation, which has only one product, has provided the following data concerning its most recent month of operations:

What is the net operating income for the month under absorption costing?

  Selling price $164   Units in beginning inventory 0   Units produced 9,600   Units sold 9,200   Units in ending inventory 400   Variable costs per unit:     Direct materials $31     Direct labor $73     Variable manufacturing overhead $19     Variable selling and administrative $23   Fixed costs:     Fixed manufacturing overhead $144,000     Fixed selling and administrative $10,100

Explanation / Answer

Answer: unit Product cost=$31+$73+$19+($144000/9600)

=$138

Net income under Absorption costing=[9200(164-138)]-(9200*23)-10100

=239200-211600-10100

=17500

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