Question

Atlanta, Inc. planned and actually manufactured 200.000 units of its single product in 2017, its first year of operation. Variable manufacturing cost was $20 per unit produced. Variable operating (nonmanufacturing) cost was $12 per unit sold. Planned and actual fixed manufacturing costs were $800,000. Planned and actual fixed operating (nonmanufacturing) costs totaled $350,000. Atlanta sold 130.000 units of product at $43 per unit. Read the requirements Requirement 1. Atlanta's 2017 operating income using absorption costing is (a) $560,000, (b) $280,000, (c) $830,000, (d) S010,000, or (e) none of these. Show supporting calculations. Begin by selecting the labels ussed in the absorption costing calculation of operating income and enter the supporting amounts. Perform the calculations in thiss step, but select the correct operating income in the next step. (For amounts with a $0 balance, make sure to enter "O" in the appropriate cell.) Absorption costing X Requirements 1. Atlanta's 2017 operating income using absorption costing is (a) $580,000. (b) $280,000, (c) $830,000. (d) S910.000, or (e) none of these. Show supporting calculations 2. Atlanta's 2017 operating income using variable costing is (a) $1,080,000, (b) $560,000, (c) $280,000, (d) $630.000, or (e) none of these. Show supporting calculations Print Done Operating income

Answer 1

Absorption Costing
Sales Revenue		$ 55,90,000
Less : Cost of Goods Sold
Variable Manufacturing Costs	$    40,00,000		=200000*20
Fixed Manufacturing Costs	$       8,00,000
Cost of Goods Manufactured	$    48,00,000
Less : Ending Inventory	$    16,80,000		=4800000/200000*70000
Cost of Goods Sold		$ 31,20,000
Gross Profit		$ 24,70,000
Less Operating expenses
Variable		$ 15,60,000
Fixed		$   3,50,000
Total Operating expenses		$ 19,10,000
Operating Income		$   5,60,000

Answer is a. $560000

Variable Costing
Sales Revenue		$ 55,90,000
Less : Variable Cost of Goods Sold		$ 26,00,000	=130000*20
Gross Contribution Margin		$ 29,90,000
Less : Variable Operating Expenses		$ 15,60,000	=130000*12
Net Contribution Margin		$ 14,30,000
Less Fixed expenses
Fixed Manufacturing Costs		$   8,00,000
Fixed Operating Expenses		$   3,50,000
Total Operating expenses		$ 11,50,000
Operating Income		$   2,80,000

Answer is c. $280000