Neon Company manufactures widgets.The following data is related to sales and production of the widgets for last year.

Using absorption costing,what is operating income for last year?
A)$39,300
B)$66,300
C)$219,700
D)$143,000

Question

Neon Company manufactures widgets.The following data is related to sales and production of the widgets for last year.

Using absorption costing,what is operating income for last year?
A)$39,300 
B)$66,300 
C)$219,700 
D)$143,000

Quizplus · Accepted Answer

A)
Fixed MOH $30,000 divided by units produced 1,500 = $20 Fixed MOH
Add Variable manufacturing cost 62
= Total Manufacturing cost $82
× 1,100 sales
= $90,200 Cost of goods sold
So: Sales $130 × 1,100 = $143,000
Less Cost of Goods Sold 90,200
Equals Gross Profit $52,800
Less Variable selling 5,500
Less fixed selling 8,000
Operating Income $39,300

Neon Company Manufactures Widgets