Question

Columbia Corporation produces a single product. The company's variable costing income statement for November appears below: Columbia Corporation Income Statement For the Month ended November 30 Sales ($18 per unit) $ 765,000 Variable expenses: Variable cost of goods sold 467,500 Variable selling expense 127,500 Total variable expenses 595,000 Contribution margin 170,000 Fixed expenses: Manufacturing 105,360 Selling and administrative 35,120 Total fixed expenses 140,480 Net operating income $ 29,520 During November, 35,120 units were manufactured and 8,650 units were in beginning inventory. Variable production costs per unit, total fixed manufacturing expenses, and the number of units produced were the same in prior months. Under absorption costing, for November the company would report a:__________.

(A) $4,850 profit(B) $4,850 loss(C) $35,750 profit(D) $19,400 profit

Answer 1

Hie, there is no correct answer from the Options provided.

The Net Profit Under absorption costing, for November would be $7,460.

This is can be calculated from reconciling the Variable Costing profit to Absorption Costing profit or Alternatively from Preparing Absorption costing statement as shown below:

Absorption Costing Income Statement for November.

Sales 765,000

Less Costs of Goods Sold

Opening Stock (8,650×14) 121,100

Add Cost of Manufacture (35,120×14) 491,600

Less Closing Stock (1270×14) (17,780) 594,920

Gross Profit 170,080

Less Expenses

Variable selling expense 127,500

Fixed Selling and administrative 35,120

Net Income / loss 7,460