Question

Keyser Corporation, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price	$	105
Units in beginning inventory		600
Units produced		8,500
Units sold		8,600
Units in ending inventory		500

Variable costs per unit:
Direct materials	$	22
Direct labor	$	39
Variable manufacturing overhead	$	3
Variable selling and administrative expense	$	13
Fixed costs:
Fixed manufacturing overhead	$	68,000
Fixed selling and administrative expense	$	162,100

The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month.

What is the net operating income for the month under absorption costing?

Noreen 5e Rechecks 2019-08-02

Multiple Choice

• $9,900

• $3,400

• $10,700

• $17,100

Answer 1

Calculation of Net Operating Income

Sales 8600*105		903000
Less- Variable cost of goods sold
Beginning Inventory 600*64	38400
Add- Variable cost of goods manufactured 8500*64	544000
Variable cost of goods available for sale	582400
Less- Ending Inventory 500*64	(32000)
Variable cost of goods sold		(550400)
Gross Contribution Margin		352600
Less- Variable selling and administrative expenses 8600*13	111800
Contribution Margin		240800
Less- Fixed expenses
Fixed manufacturing o/h	68000
Fixed selling expenses	162100	(230100)
Net Operating Income		10700