Question

Freshmart, Inc., began operations this year. The company produced 1,000 units and sold 1,000 units at a selling price of $100 per unit. Fixed overhead costs totaled $30,000 and fixed selling and administrative expenses were $15,000. Variable production costs were $25.00 per unit while variable selling and administrative expenses were $10.00 per unit. Using absorption costing, net income was:

Answer 1

Net operating income= $20,000

Step-by-step explanation:

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

Sales= 1,000*100= 100,000

COGS= (30,000 + 25*1,000)= (55,000)

Gross prorfit= 45,000

fixed selling and administrative expenses= (15,000)

variable selling and administrative= (10*1,000)= (10,000)

Net operating income= $20,000