Question

Doon Company incurred the following costs while producing 580 ​units: direct​ materials, $ 5 per​ unit; direct​ labor, $ 29 per​ unit; variable manufacturing​ overhead, $ 10 per​ unit; total fixed manufacturing overhead​ costs, $ 12 comma 180​; variable selling and administrative​ costs, $ 3 per​ unit; total fixed selling and administrative​ costs, $ 8 comma 120. There are no beginning inventories. What is the operating income using absorption costing if 580 units are sold for $ 120 ​each?

Answer 1

$22,040

Step-by-step explanation:

The operating income using absorption costing is find out by using the following equation

Sales revenue $69,600 (580 units × $120)

Less:

Direct material cost $2,900 (580 units × $5)

Direct labor cost $16,820 (580 units × $29)

Variable manufacturing overhead $5,800 (580 units × $10)

Fixed manufacturing overhead $12,180

Variable selling and admin cost $1,740 (580 units × $3)

Fixed selling and admin cost $8,120

Operating income using absorption costing $22,040

We simply deduct the all cost from the sales so that the operating income under absorption costing could come