Fasetech,Inc.has collected the following data.(There are no beginning inventories.) $$\begin{array} { | l | r | }
\hline \text { Units produced } & \text { 540 units } \
\hline \text { Sales price } & \$ 140 \text { per unit } \
\hline \text { Direct materials } & \$ 18 \text { per unit } \
\hline \text { Direct labor } & \$ 15 \text { per unit } \
\hline \text { Variable manufacturing overhead } & \$ 9 \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 16,600 \text { per year } \
\hline \text { Variable selling and administrative costs } & \$ 9 \text { per unit } \
\hline \text { Fixed selling and administrative costs } & \$ 10,900 \text { per year } \
\hline
\end{array}$$ What is the operating income using absorption costing if 500 units are sold? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar.)
A) $22,600
B) $18,230
C) $25,420
D) $34,730

Question

Fasetech,Inc.has collected the following data.(There are no beginning inventories.) $$\begin{array} { | l | r | } 
\hline \text { Units produced } & \text { 540 units } \
\hline \text { Sales price } & \$ 140 \text { per unit } \
\hline \text { Direct materials } & \$ 18 \text { per unit } \
\hline \text { Direct labor } & \$ 15 \text { per unit } \
\hline \text { Variable manufacturing overhead } & \$ 9 \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 16,600 \text { per year } \
\hline \text { Variable selling and administrative costs } & \$ 9 \text { per unit } \
\hline \text { Fixed selling and administrative costs } & \$ 10,900 \text { per year } \
\hline
\end{array}$$ What is the operating income using absorption costing if 500 units are sold? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar.)
A) $22,600
B) $18,230
C) $25,420
D) $34,730

Quizplus · Accepted Answer

Under absorption costing, all manufacturing costs (direct materials, direct labor, variable manufacturing overhead, and fixed manufacturing overhead) are included in the cost of the product. The cost per unit is calculated as follows:- Direct materials: $18- Direct labor: $15- Variable manufacturing overhead: $9- Fixed manufacturing overhead per unit: $16,600 / 540 units = $30.74 (rounded to the nearest cent)Total cost per unit = $18 + $15 + $9 + $30.74 = $72.74Operating income is calculated as:$$ \text{Operating Income} = (\text{Sales Price} \times \text{Units Sold}) - (\text{Cost per Unit} \times \text{Units Sold}) - \text{Variable S&A} - \text{Fixed S&A} $$$$ \text{Operating Income} = ($140 \times 500) - ($72.74 \times 500) - ($9 \times 500) - $10,900 $$$$ \text{Operating Income} = $70,000 - $36,370 - $4,500 - $10,900 = $18,230 $$Therefore, the operating income using absorption costing if 500 units are sold is $18,230.

Fasetech,Inc What Is the Operating Income Using Absorption Costing If 500