Elder Company, which has only one product, has provided the following data concerning its most recent month of operations:
-What is the net operating income for the month under absorption costing?
A) $(27,400)
B) $5,600
C) $9,800
D) $15,400

Question

Elder Company, which has only one product, has provided the following data concerning its most recent month of operations: 
-What is the net operating income for the month under absorption costing?
A) $(27,400) 
B) $5,600 
C) $9,800 
D) $15,400

Quizplus · Accepted Answer

To calculate net operating income under absorption costing, we need to subtract total cost of goods sold (including fixed manufacturing overhead) from sales revenue.

Total cost of goods sold under absorption costing = Variable cost of goods sold + Fixed manufacturing overhead absorbed
= $ 95,000 + (10,000 units x $8 per unit) 
= $ 175,000

Net operating income = Sales revenue - Total cost of goods sold 
= $ 190,400 - $ 175,000 
= $15,400.

Hence, the correct answer is option D.

Elder Company, Which Has Only One Product, Has Provided the Following