The absorption operating income is:
A)$120,000
B)$140,000
C)$128,000
D)$112,000

Question

The absorption operating income is:
A)$120,000 
B)$140,000 
C)$128,000 
D)$112,000

Quizplus · Accepted Answer

To calculate the absorption operating income, we need to use the formula: Sales - (Variable expenses + Fixed expenses).

Using the data provided in the question, the calculation would be:
$800,000 - ($400,000 + $260,000 + $80,000) = $60,000

However, we are given that there was $80,000 of underapplied overhead, which means that we need to add this to our calculation. 
$60,000 + $80,000 = $140,000

Therefore, the absorption operating income is $140,000, which is answer choice B.

The Absorption Operating Income Is