Question

Diego Company manufactures one product that is sold for $80 per unit. The following information pertains to the company’s first year of operations in which it produced 40,000 units and sold 35,000 units.

Variable costs per unit:
Manufacturing:
Direct materials	$	24
Direct labour	$	14
Variable manufacturing overhead	$	2
Variable selling and administrative	$	4
Fixed costs per year:
Fixed manufacturing overhead	$	800,000
Fixed selling and administrative expenses	$	496,000

10. What would have been the company’s absorption costing net operating income (loss) if it had produced and sold 35,000 units?

Answer 1

If the Firm Produced 35,000 That is Equal with the Units Sold.

The Firm Absorption costing opearing income (loss) is Same as Variable costing operating income (loss)

Answer : Operating income(loss) = ($ 36,000)