Answer:
$12,500
Explanation:
Absorption costing consider all the cost incurred in production either variable or fixed as production cost and all the operating costs as the period costs. It calculates the gross profit after deducting the cost of goods sold from the net sales and net income after deduction the operating costs from the gross profit.
First of all we need to calculate the product cost.
Manufacturing cost
Direct materials $19
Direct labor $61
Variable manufacturing overhead $7
Fixed manufacturing overhead $15
($135,000/9,000) <u> </u>
Total Product cost <u> $102</u>
Now We will calculate the Net Income
Sales (8,600 x $116) $997,600
Less: Cost of goods sold (8,600 x $102) <u>$877,200</u>
Gross Profit $120,400
Less:
Variable selling & admin expense $99,000
($11 x 9,000)
Fixed selling and admin expense <u>$8,900 </u>
Net Income <u>$12,500 </u>
