Question

Farris Corporation, which has only one product, has provided the following data concerning its most recent month of operations:Selling price 156 Units in beginning inventory 0Units produced 9,500Units sold 9,100Units in ending inventory 400 Variable costs per unit: Direct materials 29Direct labor 71Variable manufacturing overhead 17Variable selling and administrative expense 21Fixed costs: Fixed manufacturing overhead 142,500Fixed selling and administrative expense 9,900What is the net operating income for the month under absorption costing?a. $35,400

b. $11,400
c. $17,400
d. $6,000

Answer 1

c. $17,400

Step-by-step explanation:

The computation of the net operating income under absorption costing is given below:

unit product cost under Absorption costing

direct materials $29

direct labor $71

variable manufacturing overhead $17

fixed manufacturing overhead ($142,500 ÷ 9,500) $15

unit product cost $132

Now

Sales (9,100 × 156) $1,419,600

less:Variable cost of good sold (9,100 × 132) $1,201,200

Gross profit $218,400

Selling and administrative expense

variable selling expens (9,100 × 21) $191,100

Fixed selling & adm expense $9,900

Net operating income $17,400