Diego Company manufactures one product that is sold for $70 per unit in two geog

Question

Diego Company manufactures one product that is sold for $70 per unit in two geographic regions—the East and West regions. The following information pertains to the company’s first year of operations in which it produced 41,000 units and sold 36,000 units.

  

  

9.

value:
1.50 points

Required information

  
      

Diego Company manufactures one product that is sold for $70 per unit in two geographic regions—the East and West regions. The following information pertains to the company’s first year of operations in which it produced 41,000 units and sold 36,000 units.

Explanation / Answer

Solution: Calculation of company's absorption costing net operating income (loss) :

Note: when the number of units produced and the number of sold are equal, then absorption costing net operating income equals the variable costing net operating income. Therefore, absorption costing net operating loss would be $68,000.

Particulars Amount ($) Amount($) Sales(36000*70) 2,520,000 Variable cost of goods sold(36000*32) 1,152,000 Variable selling and administrative expense(36000*4) 144,000 Less: Total variable cost 1,296,000 Contribution margin 1,224,000 Fixed manufacturing overhead 984,000 Fixed selling and administrative expense 308,000 Less:Total fixed cost 1,292,000 Net operating loss (68,000)

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