Question

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

Selling price	$	117
Units in beginning inventory		750
Units produced		8,650
Units sold		8,750
Units in ending inventory		650

Variable costs per unit:
Direct materials	$	25
Direct labor	$	42
Variable manufacturing overhead	$	6
Variable selling and administrative expense	$	16
Fixed costs:
Fixed manufacturing overhead	$	69,200
Fixed selling and administrative expense	$	163,000

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?

Answer 1

Answer is given below with working notes