Damp Company incurred the following costs while producing 600 units: direct materials, $ 13 per unit; direct labor, $ 22 per unit; variable manufacturing overhead, $ 18 per unit; total fixed manufacturing overhead costs, $ 13 comma 200 ; variable selling and administrative costs, $ 10 per unit; total fixed selling and administrative costs, $ 8 comma 400. There are no beginning inventories. What is the operating income using absorption costing if 600 units are sold for $ 120 each? A. $ 6 comma 300 B. $ 2 comma 340 C. $ 12 comma 600 D. $ 23 comma 940 Click to select your answer.

Question

Business

Sky

6 March, 14:29

Damp Company incurred the following costs while producing 600 units: direct materials, $ 13 per unit; direct labor, $ 22 per unit; variable manufacturing overhead, $ 18 per unit; total fixed manufacturing overhead costs, $ 13 comma 200 ; variable selling and administrative costs, $ 10 per unit; total fixed selling and administrative costs, $ 8 comma 400. There are no beginning inventories. What is the operating income using absorption costing if 600 units are sold for $ 120 each? A. $ 6 comma 300 B. $ 2 comma 340 C. $ 12 comma 600 D. $ 23 comma 940 Click to select your answer.

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Answers (1)

Know the Answer?

Mario Morgan · Answer 1

Option (c) is correct.

Explanation:

Unit product cost under absorption costing:

= Direct materials + Direct labor + Variable manufacturing overhead + Fixed manufacturing overhead

= $ 13 per unit + $22 + $18 + $22

= $75 per unit

Operating Income using absorption costing

Operating Income:

= 600 * $120 - 600 * $75 - 600 * $10 - $8,400

= $72,000 - $45,000 - $6,000 - $8,400

= $12,600