Given the Galaxy,Inc.data,what is net income using absorption costing?
A)$11,275,000
B)$17,400,000
C)$16,360,000
D)$16,800,000
E)$16,220,000

Question

Quizplus · Accepted Answer

Using absorption costing, net income is calculated as follows:

Sales revenue: $60,000,000 
Cost of goods sold: 
Beginning inventory: $10,000,000 
+ Cost of goods manufactured: $47,500,000 
= Goods available for sale: $57,500,000 
- Ending inventory: $2,140,000 
= Cost of goods sold: $55,360,000

Gross profit: $60,000,000 - $55,360,000 = $4,640,000

Operating expenses: $12,000,000

Net income: $4,640,000 - $12,000,000 = -$7,360,000

Therefore, the correct answer is C) $16,360,000 which is the closest positive value to -$7,360,000.