Homeyer Corporation has provided the following data for its two most recent years of operation: The net operating income (loss) under absorption costing in Year 1 is closest to:
A) $102,000
B) $30,000
C) $176,000
D) $208,000

Question

Homeyer Corporation has provided the following data for its two most recent years of operation:  The net operating income (loss) under absorption costing in Year 1 is closest to:
A) $102,000 
B) $30,000 
C) $176,000 
D) $208,000

Quizplus · Accepted Answer

To calculate the net operating income (loss) under absorption costing, we need to subtract the cost of goods sold (which includes fixed manufacturing overhead costs) from the sales revenue, and then subtract all other operating expenses.

In Year 1, the sales revenue was $600,000, the cost of goods sold was $360,000, and the other operating expenses were $138,000. Therefore, the net operating income under absorption costing was:

$600,000 - $360,000 - $138,000 = $102,000 (Option A)

Homeyer Corporation Has Provided the Following Data for Its Two