Question

During 2016, Basler Manufacturing produced 60,000 units and sold 55,000 for $10 per unit. Variable manufacturing costs were $5 per unit. Annual fixed manufacturing overhead was $120,000 ($2 per unit). Variable selling and administrative costs were $1 per unit sold, and fixed selling and administrative costs were $30,000.

Required:
Prepare an absorption costing income statement.

Answer 1

Instructions are below.

Step-by-step explanation:

Giving the following information:

Production= 60,000 units

Units sold= 55,000

Selling price per unit= $10

Variable manufacturing costs were $5 per unit.

Annual fixed manufacturing overhead was $120,000 ($2 per unit). Variable selling and administrative costs were $1 per unit sold

Fixed selling and administrative costs were $30,000.

The absorption costing method includes the unitary fixed overhead costs to the cost of goods sold.

Sales= 55,000*10= 550,000

COGS= (5 + 2)*55,000= (385,000)

Gross profit= 165,000

Total selling and administrative costs=(1*55,000)+30,000= (85,000)

Net operating income= 80,000