Question

Keyser Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $133 Units in beginning inventory 950 Units produced 8,850 Units sold 8,950 Units in ending inventory 850 Variable costs per unit: Direct materials $ 29 Direct labor $ 46 Variable manufacturing overhead $ 10 Variable selling and administrative expense $ 20 Fixed costs: Fixed manufacturing overhead $ 70,800 Fixed selling and administrative expense $164,200 The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month. What is the net operating income for the month under absorption costing

Answer 1

The net operating income for Keyser Corporation under absorption costing is found by subtracting COGS, variable selling and administrative expenses, and fixed selling and administrative expenses from the total revenue, resulting in a net operating income of $4,200 for the month.

Step-by-step explanation:

To calculate the net operating income under absorption costing for Keyser Corporation, we need to consider both variable and fixed costs as well as the cost of goods sold (COGS) which includes both fixed manufacturing overhead and the cost of the units sold. The calculation is as follows:

• First, we need to calculate the COGS. Since the company produces the same number of units every month, the fixed manufacturing overhead per unit would be the total fixed manufacturing overhead divided by the number of units produced. COGS includes direct materials, direct labor, variable manufacturing overhead, and applied fixed manufacturing overhead per unit times number of units sold.
• Next, calculate total revenue by multiplying the selling price by the number of units sold.
• Then, deduct the COGS and the total variable selling and administrative expense (calculated by multiplying the variable expense per unit by the number of units sold) and fixed selling and administrative expense from the total revenue to find the net operating income.

To illustrate:

• Total fixed manufacturing overhead per unit = $70,800 / 8,850 units produced = $8 per unit
• COGS = ($29 + $46 + $10 + $8) * 8,950 units sold
• Total Revenue = $133 * 8,950 units sold
• Total Variable Selling and Administrative Expense = $20 * 8,950 units sold
• Net Operating Income = Total Revenue - COGS - Total Variable Selling and Administrative Expense - Fixed Selling and Administrative Expense

Step-by-Step Calculation:

COGS = ($29 + $46 + $10 + $8) * 8,950 = $843,450

1. Total Revenue = $133 * 8,950 = $1,190,850
2. Total Variable Selling and Administrative Expense = $20 * 8,950 = $179,000
3. Net Operating Income = $1,190,850 - $843,450 - $179,000 - $164,200 = $4,200

Answer 2

$93

Step-by-step explanation:

Product cost under absorption costing = all manufacturing overheads

= $93

This is the Cost per unit manufactured