Question

Brush Industries reports the following information for May: Sales $ 980,000 Fixed cost of goods sold 116,000 Variable cost of goods sold 266,000 Fixed selling and administrative costs 116,000 Variable selling and administrative costs 141,000 Calculate the operating income for May under absorption costing.

Answer 1

Net operating income= 341,000

Step-by-step explanation:

We need to use the following structure:

Gross profit= sales - cost of goods sold

Net operating income= Gross profit - other expenses (variable and fixed)

Under the absorption costing method, the cost of goods sold incorporates the fixed overhead.

Sales= 980,000

COGS= (116,000 + 266,000)= (382,000)

Gross profit= 598,000

Fixed selling and administrative costs= (116,000)

Variable selling and administrative costs= (141,000)

Net operating income= 341,000