Answer:
Income statement under absorption cost:
Sales Revenue 7,920,000
COGS 220,000 x 26 = <u> (5,720,000) </u>
Gross profit: 2,200,000
S&A expense: (990,000)
variable: 330,000
fixed: 630,000 <u> </u>
Operating Income 1,210,000
Explanation:
Variable cost of goods manufactured $6,360,000
Fixed costs: Fixed manufacturing costs $530,000
Under absorption cost, the company will distribute the manufacturing cost over the units produced:
variable manufacturing cost: 6,360,000
fixed manufacturing cost: 530,000
Total cost: 6,890,00
Units produced: 265,000
units sold 220,000
+ ending inventory 45,000
Cost per units: 26
The selling and adminsitrative (S&A) will be count as period cost.
