Question

A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (10,000 units): Direct materials $140,000 Direct labor 40,000 Variable factory overhead 20,000 Fixed factory overhead 4,000 $204,000 Selling & Administrative Expenses: Variable Selling & Administrative Expenses$ 34,000 Fixed Selling & Administrative Expenses 2,000 36,000 If 2,000 units remain unsold at the end of the month and sales total $300,000 for the month, the amount of operating income that would be reported on the absorption costing income statement is $100,800 $160,000 none of these answer choices $163,200 $100,000

Answer 1

fx A B D 1 2 Correct Answer is $ 100,800 3 4 5 6 7 300,000 163,200 136,800 8 Absorption Costing Sales Less : Cost of goods sold Gross Margin Less : Variable Selling and administrative expenses Fixed Selling and administrative expenses Net Operating Income 9 10 11 34,000 2,000 100,800 12 13 14 Working 15 16 Cost of goods sold 17 18 Direct Material Direct Labor 19 20 140,000 40,000 20,000 4,000 204,000 21 22 Variable Factory Overhead Fixed Factory Overhead Total for 10,000 units Less : Ending Inventory ( 204,000 / 10,000) * 2000 units Total for 8,000 units 23 40,800 163,200 24 25