Petra, Inc. has collected the following data. (There are no beginning inventories.): Units produced 580 units Units sold 580 units Sales price $ 230 per unit Direct materials $ 30 per unit Direct labor $ 35 per unit Variable manufacturing overhead $ 10 per unit Fixed manufacturing overhead $ 23 comma 000 per year Variable selling and administrative costs $ 15 per unit Fixed selling and administrative costs $ 10 comma 000 per year What is the operating income using absorption costing? (Round any intermediate calculations to the nearest cent and your final answer to the nearest dollar.)

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08-04-2020
Business

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Petra, Inc. has collected the following data. (There are no beginning inventories.): Units produced 580 units Units sold 580 units Sales price $ 230 per unit Direct materials $ 30 per unit Direct labor $ 35 per unit Variable manufacturing overhead $ 10 per unit Fixed manufacturing overhead $ 23 comma 000 per year Variable selling and administrative costs $ 15 per unit Fixed selling and administrative costs $ 10 comma 000 per year What is the operating income using absorption costing? (Round any intermediate calculations to the nearest cent and your final answer to the nearest dollar.)

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almatheia almatheia · Answer 1 · 2020-04-09T06:31:00+02:00

Answer:

Operating income is $28,197.2

Explanation:

In order to calculate operating income, first we have to calculate total product cost per unit which is calculated as shown below:

Direct material per unit = $30

Direct labor = $35

Variable manufacturing overhead per unit = $10

Fixed manufacturing overhead per unit = 23,000 ÷ 580 = $39.66 per unit

Product cost per unit = 30 + 35 + 10 + 39.66 = $114.66

Now compute operating income as shown below:

Total sales = Per unit sales price × Units sold

= $230 × 580

= $133,400

Cost of goods sold = Units produced × product cost per unit

= 580 × 114.66

= $66,502.8

Gross profit = Sales - COGS

= 113,400 - 66,502.8

= $46,897.2

Fixed selling and administrative cost = $10,000

Variable selling and administrative cost = 15 × 580 = $8,700

Total selling and administrative cost = 10,000 + 8,700 = $18,700

Operating income = Gross profit - total selling and administrative cost

= $46,897.2 - 18,700

= $28,197.20

andromache andromache · Answer 2 · 2022-04-08T13:08:20+02:00

The Operating income using absorption costing is $28,197.2.

Calculation of the operating income:

But before that following calculations need to be done:

Since

Direct material per unit = $30

Direct labor = $35

Variable manufacturing overhead per unit = $10

Now

Fixed manufacturing overhead per unit should be

= 23,000 ÷ 580

= $39.66 per unit

And,

Product cost per unit = 30 + 35 + 10 + 39.66 = $114.66

Now

operating income should be