Question

# Keyser Corporation, which has only one product, has provided the following data concerning its most recent...

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

 Selling price \$ 101 Units in beginning inventory 550 Units produced 8,450 Units sold 8,550 Units in ending inventory 450
 Variable costs per unit: Direct materials \$ 21 Direct labor \$ 38 Variable manufacturing overhead \$ 2 Variable selling and administrative expense \$ 12 Fixed costs: Fixed manufacturing overhead \$ 67,600 Fixed selling and administrative expense \$ 161,800

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?

Solution:

Working:

= \$67,600 / 8,450 Unit

= \$8

Fixed Manufacturing Overhead = No. of Units Sold * Fixed Manufacturing Overhead rate

= 8,550 Units * \$8

= \$68,400

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