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 at Neon Company?
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 at Neon Company?
A) $39,300 
B) $66,300 
C) $219,700 
D) $143,000

Quizplus · Accepted Answer

Absorption costing includes fixed manufacturing costs as part of the cost of goods sold. In this case, the fixed manufacturing costs are $76,400. Operating income is calculated as sales revenue minus cost of goods sold minus operating expenses. Therefore, operating income for last year at Neon Company is $219,700 - $153,400 = $66,300.

Neon Company Manufactures Widgets