Question

Peterson Company’s records for the year ended December 31 show that no finished goods inventory existed...

Peterson Company’s records for the year ended December 31 show that no finished goods inventory existed at January 1 and no work was in process at the beginning or end of the year.

Net sales

$1,400,000

Manufacturing costs:

Variable

630,000

Fixed

315,000

Operating expenses:

Variable

98,000

Fixed

140,000

Units manufactured

70,000

Units sold

60,000
Under the absorption costing method, Peterson’s operating income for the year is
A. $374,500
B. $217,000
C. $352,000
D. $307,000
Business   Accounting   
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Answer #1

Answer is C

Particulars Amt
Sales 1400000
Less: Variable Cost (60000 x 13.5) 810000
Gross Profit 590000
Less: Operating Expense(98000+140000) 238000
Income 352000
Note:
Particulars Amt
Variable Manufacturing Cost    630,000.00
Fixed Manufacturing Cost    315,000.00
Total Cost (A)    945,000.00
No of Unit Produced (B)      70,000.00
Per Unit (A/B)              13.50
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