During its first year of operations, Kima Corp. experienced the following: Units manufactured 70,000
Units sold 60,000
Product costs:
Variable $10.50/unit
Fixed $315,000
Selling and Administrative:
Variable $1.60/unit
Fixed $140,000
The amount of fixed costs deducted from revenues under the absorption costing approach would be:
A)$410,000
B)$455,000
C)$390,000
D)$435,000

Question

Quizplus · Accepted Answer

The absorption costing approach deducts all fixed costs from revenues, regardless of whether they are incurred during the period in which the units are manufactured or sold. In this case, the fixed costs are $315,000 for product costs and $140,000 for selling and administrative expenses, for a total of $455,000.

During Its First Year of Operations, Kima Corp