Answer:
B) $8,400
Explanation:
Absorption costing consider all the cost incurred in production either variable or fixed as production cost.
As we know variable cost vary with the change in the sale but the fixed costs remains constant whatever the level of sale is.
As per given data
Selling price = $6,600
Variable manufacturing cost = $3,600
Manufacturing Fixed Cost = $18,000
Total cost per unit = $3,600 + $18,000/20 = $4,500
Sales = Selling price x Numbers of units sold = $6,600 x 16 = $105,600
Cost of goods sold = Units sold x Cost per unit = 16 units x $4,500 = $72,000
Gross income = Sales - Cost of Goods sold = $105,600 - $72,000 = $33,600
Selling and Admin Cost = Variable cost + Fixed = (16 x $75) + $24,000 = $25,200
Net Income = Gross Income - Selling and Admin cost = $33,600 - $25,200 = $8,400
The Income from operation under absorption costing for 2017 is $8,400.
Cost per unit = Variable Manufacturing per unit + Fixed Manufacturing per unit
Cost per unit = $3,600 + $18,000 / 20
Cost per unit = $3,600 + $900
Cost per unit = $4,500
Sales price = Selling Price per unit * Units Sold
Sales price = $6,600 * 16
Sales price = $105,600
Cost of Goods Sold = Cost per unit * Units Sold
Cost of Goods Sold = $4,500 * 16
Cost of Goods Sold = $72,000
Selling & Administrative Expense = Variable Selling and Administrative Expense * Units Sold + Fixed Selling and Administrative Expense
Selling & Administrative Expense = $75 * 16 + $24,000
Selling & Administrative Expense = $25,200
Income from Operation = Sales - Cost of Goods Sold - Selling and Administrative Expense
Income from Operation = $105,600 - $72,000 - $25,200
Income from Operation = $8,400
Hence, the Income from operation under absorption costing for 2017 is $8,400.
Therefore, the Option B is correct.
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