Answer:
b) $113,000
Explanation:
For the computation of net income under absorption costing first we need to follow some steps which is shown below:-
variable overhead per unit = $105,000 ÷ 35,000
= $3 per unit
The Variable cost of production per unit
Particulars Amount
Direct material $19.00
Direct labor $21.00
Variable overhead $3.00
Variable cost of production
per unit $43.00
Cost per unit of finished goods under absorption costing
Particulars Amount
Total direct material cost $665,000
($19 × 35000)
Total direct labor $735,000
($21 × 35000)
Total variable overhead $105,000
Total fixed overhead $175,000
Total $1,680,000
Units in finished goods = Number of units produced - units sold
= 35,000 - 21,000
= 14,000
Cost of finished goods under variable costing
= Variable cost of production per unit × Number of units in finished goods
= $43 × 14,000
= $602,000
Cost of goods sold
= Production cost - Finished goods cost
= $1,680,000 - $602,000
= $1,078,000
Income statement under absorption costing
Particulars Amount
Sales revenue $1,491,000
($71 × 21,000)
Less: cost of goods sold -$1,078,000
Gross Profit $413,000
Less : operating expenses -$300,000
Net operating income $113,000
