A manufacturing company that produces a single 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) $11,900
B) $(20,200)
C) $14,600
D) $2,700

Question

A manufacturing company that produces a single 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) $11,900 
B) $(20,200) 
C) $14,600 
D) $2,700

Quizplus · Accepted Answer

Under absorption costing, net operating income is calculated by deducting the total cost of goods sold (including fixed overhead cost) from revenues.
Total cost of goods sold under absorption costing = Direct materials + Direct labor + Variable manufacturing overhead + Fixed manufacturing overhead
= $60,000 + $15,000 + $12,000 + $25,000
= $112,000
Net operating income = Revenues - Total cost of goods sold
= $126,600 - $112,000
= $14,600. Therefore, the correct answer is C.

A Manufacturing Company That Produces a Single Product Has Provided