Question

Naomi company manufactures and sells one product. The following information pertains to each of the company’s...

Naomi company manufactures and sells one product. The following information pertains to each of the company’s first two years of operations, using super-variable costing.

     

Variable cost per unit:
   Direct materials $10
Fixed costs per year:
   Direct labor $113,400
Fixed manufacturing overhead $94,500
Fixed selling and administrative expenses $233,000

The company does not incur any variable manufacturing overhead costs or variable selling and administrative expenses. The selling price of the company’s product is $150 per unit.

Year 1 Year 2
Production (units) 6,300 6,300
Sale (units) 5,900 6,700

For external reporting purpose, the company has to use GAAP-consistent absorption accounting.

Q:) The absorption costing income for Year 1 is:

A:) $ _____???

Homework Answers

Answer #1

--Requirement: Absorption Costing Income for Year 1 = $ 398300

Sales 5900 units x $ 150 $885,000
Less: Cost of Goods Sold
Direct Material 5900 units x $ 10 $59,000
Fixed Direct Labor ($113400 / 6300 units) x 5900 units $106,200
Fixed manufacturing overhead ($94500 / 6300 units) x 5900 units $88,500
Gross Profits $631,300
Less: Operating expenses
Fixed selling & admin expenses $233,000
Absorption Costing Income for Year 1 $398,300 [Answer]
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