BioClinic sells its product for $80 per unit. During 2025, it produced 120,000 units and sold 105,000 units. Costs per unit are: direct materials $25, direct labor $10, variable overhead $5, and variable operating expenses $3. Fixed costs are $840,000 manufacturing overhead, and $75,000 operating expenses. Assuming no variances were reported, no beginning inventory and the company uses absorption costing, what will be reported as operating income?
A)$2,370,000.
B)$2,685,000.
C)$2,970,000.
D)$3,075,000.

Question

Quizplus · Accepted Answer

$840,000 ÷ 120,000 = $7 per unit.
$25 + $10 + $5 + $7 = $47 per unit.
$47 x 105,000 = $4,935,000
105,000 x $80 = $8,400,000
$8,400,000 - $4,935,000 = $3,465,000
$3,465,000 - $75,000 - (105,000 x $3) = $3,075,000
FMOH ÷ units produced = FMOH per unit
DM per unit + DL per unit + VMOH per unit + FMOH per unit = Abs cost per unit 
Abs cost per unit x units sold = COGS
Units sold x selling price per unit = total sales
Total sales - COGS = GM
GM - F op expenses - (V op exp per unit x units sold) = op income

BioClinic Sells Its Product for $80 Per Unit