Question

The HF Corporation manufactures and sells toy gyroscopes. The following data is related to sales and production of the toy gyroscopes for last year. Selling price per unit $ 8.10 Variable manufacturing costs per unit $ 1.88 Variable selling and administrative expenses per unit $ 4.55 Fixed manufacturing overhead? (in total) $ 76 comma 000 Fixed selling and administrative expenses? (in total) $ 84 comma 000 Units produced during the year 500 comma 000 Units sold during year 160 comma 000 Using absorption? costing, what is operating income for last? year? (Round any intermediary calculations to the nearest? cent.)

Answer 1

SOLUTION

Net operating income = $159,200

Particulars	Amount ($)	Amount ($)
Sales (160,000 * $8.10)		1,296,000
Less: Cost of goods sold
Beginning inventory	0
Cost of goods manufactured ($2.03 * 500,000)	1,015,000
Cost of goods available for sale	1,015,000
Less: Ending inventory ($2.03 * 340,000)	(690,200)
Cost of goods sold		324,800
Gross profit		971,200
Less: Variable selling and administrative expenses (160,000*$4.55)		(728,000)
Fixed selling and administrative expenses		(84,000)
Net Operating income		159,200

Total manufacturing cost per unit = Fixed manufacturing cost per unit + Variable manufacturing cost per unit

= ($76,000/500,000) + $1.88

= 0.15 + 1.88 = $2.03