Question

Doon Company incurred the following costs while producing 580 ​units: direct​ materials, $ 5 per​ unit; direct​ labor, $ 29 per​ unit; variable manufacturing​ overhead, $ 10 per​ unit; total fixed manufacturing overhead​ costs, $ 12 comma 180​; variable selling and administrative​ costs, $ 3 per​ unit; total fixed selling and administrative​ costs, $ 8 comma 120. There are no beginning inventories. What is the operating income using absorption costing if 580 units are sold for $ 120 ​each?

Answer 1

Answer:

$22,040

Explanation:

The operating income using absorption costing is find out by using the following equation

Sales revenue                        $69,600    (580 units × $120)

Less:

Direct material cost               $2,900    (580 units × $5)  

Direct labor cost                    $16,820    (580 units × $29)  

Variable manufacturing overhead $5,800    (580 units × $10)  

Fixed manufacturing overhead     $12,180

Variable selling and admin cost $1,740    (580 units × $3)  

Fixed selling and admin cost      $8,120

Operating income using absorption costing   $22,040

We simply deduct the all cost from the sales so that the operating income under absorption costing could come