Question

Farris Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $108 Units in beginning inventory 0 Units produced 8,900 Units sold 8,500 Units in ending inventory 400 Variable costs per unit: Direct materials $ 17 Direct labor $ 59 Variable manufacturing overhead $ 5 Variable selling and administrative expense $ 9 Fixed costs: Fixed manufacturing overhead $133,500 Fixed selling and administrative expense $ 8,700 What is the net operating income for the month under absorption costing

Answer 1

Net operating profit= 441,800

Step-by-step explanation:

The absorption costing method includes all costs related to production, both fixed and variable. The unit product cost is calculated using direct material, direct labor, and total unitary manufacturing overhead.

First, we need to calculate the unitary production cost:

Unitary production cost= 17 + 9 + 5 + (133,500/8,900)

unitary production cost= $46

Now, the income statement:

Sales= 8,500*108= 918,000

COGS= (391,000)

Gross profit= 527,000

Total selling and administrative expense= (8,700 + 9*8,500)= (85,200)

Net operating profit= 441,800