Question

Aaron Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $ 90 Units in beginning inventory 0 Units produced 3,400 Units sold 3,000 Units in ending inventory 400 Variable costs per unit: Direct materials $ 21 Direct labor $ 38 Variable manufacturing overhead $ 6 Variable selling and administrative expense $ 4 Fixed costs: Fixed manufacturing overhead $ 54,400 Fixed selling and administrative expense $ 3,000 What is the net operating income for the month under absorption costing

Answer 1

Solution :

The net operating income under absorption costing.

Sales (3000 x $ 90)                                                  $ 2,70,000

Less : The cost of the goods sold (3000 x $ 81)     $ 2,43,000

Gross margin                                                             $ 27,000

Less : The selling general and the administrative  $ 15,000

expenses (3000 + 12000)        

Net operating income                                               $ 12,000 (loss)