Question

Assume that Job P includes 30 units that each sell for $2,400 and that the company's selling and administrative expenses in March were $21,000. Prepare an absorption costing income statement for March.

Answer 1

An absorption costing income statement for March would show total sales of $72,000 with selling and administrative expenses of $21,000, resulting in an operating income of $51,000.

Step-by-step explanation:

Absorption Costing Income Statement

To prepare an absorption costing income statement for March, we start with the sales generated from Job P. With 30 units each selling for $2,400, the total sales amount to 30 units × $2,400/unit = $72,000. From these sales, we need to subtract the explicit costs, which include the cost of goods sold (COGS), selling, and administrative expenses. The question does not provide COGS; hence, we must assume that this information is either provided elsewhere or that the COGS is already accounted for in the $21,000 selling and administrative expenses.

The income statement is as follows:

• 
  
• Total Sales: $72,000
• 
  
• Less: Selling and Administrative Expenses: $21,000
• 
  
• Operating Income: $51,000

Note that this is a simplified income statement and does not include taxes, interest, or any other relevant business expenses.