Question

Brush Industries reports the following information for May:

Sales	$	995,000
Fixed cost of goods sold		119,000
Variable cost of goods sold		269,000
Fixed selling and administrative costs		119,000
Variable selling and administrative costs		144,000

Calculate the operating income for May under absorption costing.

Multiple Choice

• $726,000

• $344,000

• $582,000

• $607,000

Answer 1

Income Statement for May under absorption costing.
Particulars	Amount ($)	Amount ($)
Sales		9,95,000
Less: Cost of goods sold
Fixed cost of goods sold	1,19,000
Variable cost of goods sold	2,69,000	3,88,000
Gross Profit		6,07,000
Less: Selling and administrative costs
Fixed selling and administrative costs	1,19,000
Variable selling and administrative costs	1,44,000	2,63,000
Net Operating Income		3,44,000

“Hence, the operating income for May under absorption costing will be $344,000”