Question

The following information is available for Barnes Company for the fiscal year ended December 31: Beginning finished goods inventory in units 0 Units produced 8,600 Units sold 5,900 Sales $ 1,180,000 Materials cost $ 172,000 Variable conversion cost used $ 86,000 Fixed manufacturing cost $ 946,000 Indirect operating costs (fixed) $ 118,000 The absorption costing operating income is:

Answer 1

Answer:

$378,000

Explanation:

The absorption costing operating income is shown below:-

Total manufacturing cost = Material cost + Variable conversion cost + Fixed manufacturing cost

= $172,000 + $86,000 + $946,000

= $1,204,000

Unit product cost = Total manufacturing cost ÷ Units produced

= $1,204,000 ÷ 8,600

= $140

Ending inventory in units = Produced - Sales

= 8,600 - 5,900

= 2,700

Ending inventory under absorption costing = Ending inventory in units × Unit product cost

= 2,700 × $140

= $378,000