Question

Production costs (20,900 units): Direct materials $176,800 Direct labor 235,700 Variable factory overhead 240,300 Fixed factory overhead 102,900 $755,700 Operating expenses: Variable operating expenses $132,000 Fixed operating expenses 43,400 175,400 If 1,900 units remain unsold at the end of the month and sales total $1,158,000 for the month, what would be the amount of income from operations reported on the absorption costing income statement

Answer 1

income from operations is $295,604

Step-by-step explanation:

Absorption Costing included both the Variable and Fixed Manufacturing overheads in product cost.

All Non-Manufacturing Costs are treated as period costs

Total Manufacturing Cost = 176,800 + 235,700 + 240,300 + 102,900

= 755,700

Product Cost = Total Manufacturing Costs / Total Units of Production

= $755,700/ 20,900 units

= $ 36.16

absorption costing income statement

Sales $1,158,000

Less Cost of Goods Sold

Opening Stock 0

Add Cost of Goods Manufactured $755,700

Less Closing Stock ($ 36.16×1,900 units) ($68,704) ($686,996)

Gross Profit $471,004

Less Expenses

Operating expenses: Variable operating expenses ($132,000)

Fixed operating expenses ($43,400)

Net Income $295,604

Therefore, income from operations is $295,604