Question

Flint Enterprises had the following cost and production information for April:

Units Produced				20,000
Unit Sales Price			$	210
Manufacturing Cost Per Unit
Direct Material			$	40
Direct Labor			$	25
Variable Manufacturing Overhead			$	14
Fixed Manufacturing Overhead	($360,000/20,000)	=	$	18
Full Manufacturing Cost Per Unit			$	97
Nonmanufacturing Costs
Variable Selling Expenses			$	66,000
Fixed General and Administrative Costs			$	57,000

Inventory increased by 5,000 units during April. What is Flint Enterprise's income under absorption costing?

Multiple Choice

• $1,097,000

• $1,510,000

• $1,543,000

• $1,572,000

Answer 1

Correct answer-----------$1,572,000

Working

Sales revenue (15000 x $210)	$ 3,150,000.00
Cost of goods sold (15000 x $97)	$ 1,455,000.00
Gross profit	$ 1,695,000.00
Less: operating expenses
Variable Selling Expenses	$        66,000.00
Fixed General and Administrative Costs	$        57,000.00
Total operating expense	$      123,000.00
Net income	$ 1,572,000.00

In absorption costing fixed manufacturing cost is added to inventory.

Units produced -Units increased during year in ending inventory= Units sold

20000-5000= 15000 units sold