Question

At XLT Inc, variable manufacturing costs are $80 per unit, fixed manufacturing overhead costs are $40,000, and Selling and Administrative expenses are fixed during the period for $15,000. Sales are 4,000 units at a sales price of $95 per unit. Calculate the Net Operating Income using Absorption Costing if production is 8,000 units.

• $5,000

• $55,000

• $40,000

• $25,000

Answer 1

The Answer is $ 25,000

Working:

Income Statement (Absorption Costing)
For the Month Ended
Sales Revenue [ 4000*95]		$ 380,000
Less: COGS
Variable Manufacturing Overhead [4000*80]	$              320,000
Fixed Manufacturing Overhead [40000/8000*4000]	$                 20,000
Fixed selling and administrative expenses	$                 15,000
Total Expenses		$ 355,000
Net Operating Income		$    25,000