Answer:
Net Income under absorption costing is $11,250.
Explanation:
<u>Absorption Costing Income Statement.</u>
Sales Revenue (750 units × $100) $75,000
Less Cost of Sales
Opening Inventory $0
Add Cost of Goods Manufactured (1,000 units × $55.00) $55,000
Less Closing Inventory (250 units × $55.00) ($13,750)($41,250)
Gross Profit $33,750
Less Expenses :
Selling and administrative expenses :
Fixed ($15,000)
Variable (750 units×$10.00) ($7,500)
Net Income / (Loss) $11,250
Conclusion :
Manufacturing costs under absorption costing include both fixed and variable costs.
All Non-manufacturing costs are treated as period costs, expense during the period.
Net Income under absorption costing is $11,250.
