Question

Hayes Company operated at normal capacity during the current year, producing 52268 units of its single...

Hayes Company operated at normal capacity during the current year, producing 52268 units of its single product. Sales totalled 38018 units at an average price of $22.33 per unit. Variable manufacturing costs were $10.75 per unit, and variable marketing costs were $4.13 per unit sold. Fixed costs were incurred uniformly throughout the year and amounted to $182213 for manufacturing and $61960 for marketing. There were no opening inventories.

What is Hayes operating income (loss) under absorption costing?

Select one:

a. $-114126

b. $39061

c. $88738

d. $105631

Homework Answers

Answer #1

Income statement (Absorption costing)

Sales (38,018 x 22.33)

848,942

Variable manufacturing costs (52,268 x 10.75)

561,881

Fixed manufacturing overheads

182,213

Cost of goods produced

744,094

+ Opening stock of finished goods

0

- Closing stock of finished goods (744,094 x 14,250/52,268)

- 202,865

Cost of goods sold

541,229

+ Fixed Selling and administrative overheads

61,960

+ variable marketing costs (38,018 x 4.13) 157,014

Total cost

760,203

Profit (Sales - Total cost)

$88,738

Hayes operating income under absorption costing = $88,738

Correct option is (c)

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