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Production costs (20,900 units): Direct materials $176,800 Direct labor 235,700 Variable factory overhead 240,300 Fixed factory overhead 102,900 $755,700 Operating expenses: Variable operating expenses $132,000 Fixed operating expenses 43,400 175,400 If 1,900 units remain unsold at the end of the month and sales total $1,158,000 for the month, what would be the amount of income from operations reported on the absorption costing income statement

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Zviko

Answer:

income from operations is $295,604

Explanation:

Absorption Costing included both the Variable and Fixed Manufacturing overheads in product cost.

All Non-Manufacturing Costs are treated as period costs

Total Manufacturing Cost = 176,800 + 235,700 + 240,300 + 102,900

                                          = 755,700

Product Cost = Total Manufacturing Costs / Total Units of Production

                      = $755,700/ 20,900 units

                      = $ 36.16

absorption costing income statement

Sales                                                                                    $1,158,000

Less Cost of Goods Sold

Opening Stock                                                        0

Add Cost of Goods Manufactured                 $755,700

Less Closing Stock ($ 36.16×1,900 units)       ($68,704)   ($686,996)

Gross Profit                                                                            $471,004

Less Expenses

Operating expenses: Variable operating expenses         ($132,000)

Fixed operating expenses                                                  ($43,400)

Net Income                                                                           $295,604

Therefore, income from operations is $295,604

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