The following information applies to Hawks Corporation: Using absorption costing, what will Hawks record as operating income if the units were sold for $95 each and assuming no variances were reported?
A)$556,000.
B)$988,000.
C)$1,036,000.
D)$1,108,000.

Question

The following information applies to Hawks Corporation:  Using absorption costing, what will Hawks record as operating income if the units were sold for $95 each and assuming no variances were reported?
A)$556,000. 
B)$988,000. 
C)$1,036,000. 
D)$1,108,000.

Quizplus · Accepted Answer

0 + 40,000 - 4,000 = 36,000 units
$22 + $15 + $5 + $12 = $54 per unit.
36,000 x $54 = $1,944,000
36,000 x $95 = $3,420,000
$3,420,000 - $1,944,000 = $1,476,000
($10 x 36,000) + $80,000 = $440,000
$1,476,000 - $440,000 = $1,036,000
Beg inv + units produced - end inv = units sold
DL per unit + Dm per unit + VMOH per unit + FMOH per unit = absorption product cost per unit
Units sold x absorption product cost per unit = COGS
Units sold x selling price per unit = sales
Sales - COGS = GM
(Var op exp per unit x units sold) + Fixed op exp = total op exp
GM - total op exp

The Following Information Applies to Hawks Corporation: Using Absorption