Question

1. MSU manufactures widgets. The following data is related to sales and production of the widgets for last year.
   
   Selling price per unit Variable manufacturing costs per unit Variable selling and administrative expenses per unit Fixed manufacturing overhead (in total) Fixed selling and administrative expenses (in total) Units produced during the year Units sold during year $ 130.00 $ 6200 $5.00 $ 30,000 $ 8,000 1,500 1,100
   
   Using absorption costing, what is operating income for last year?

a. $ 39,300

b. $ 66,300

c. $219,700

d. $143,000

Answer 1

Cost of goods sold = Variable manufacturing cost per in unit + (Fixed manufacturing overhead / 1,500 units )

= $62.00 + ($30,000 / 1,500 )

= $62.00 + $20.00

= $82.00

Sales ($130 * 1,100 units)	$143,000
(-) Cost of Goods sold ($82.00 * 1,100 units)	$90,200
Gross profit	$52,800
(-) Variable selling and administrative expenses ($5.00 * 1,100 units)	$5,500
(-) Fixed selling and administrative expenses	$8,000
Operating income	$39,300