Question

Hyper Color Company 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 $170 $62 $9 $30,000 $9,000 1,600 1,000 Using absorption costing, what is operating income for last year? (Round any intermediary calculations to the nearest whole dollar.) O A $170,000 OB. $233,000 OC. $251,000 OD. $71,000

Answer 1

Solution:

Unit product cost = Variable manufacturing cost per unit + Fixed manufacturing cost per unit =$62 + ($30,000 / 1600) = $81 per unit

Operating income for last year = Sales revenue - Cost of goods sold - Selling and administrative expenses

= (1000*$170) - (1000*$81) - (1000*$9 + $9,000)

= $71,000

Hence option D is correct.