Danahy Corporation manufactures a single product. The following data pertain to the company's operations over the last two years: What was the absorption costing net operating income this year?
A) $62,000
B) $74,000
C) $70,000
D) $66,000

Question

Danahy Corporation manufactures a single product. The following data pertain to the company's operations over the last two years:  What was the absorption costing net operating income this year?
A) $62,000 
B) $74,000 
C) $70,000 
D) $66,000

Quizplus · Accepted Answer

The absorption costing net operating income is calculated as follows:
Sales - Cost of goods sold (based on absorption costing) - Selling and administrative expenses = Net operating income
Sales = $560,000
Cost of goods sold (based on absorption costing) = $308,000 + $20,000 - $18,000 = $310,000
Selling and administrative expenses = $166,000
Net operating income = $560,000 - $310,000 - $166,000 = $74,000. Therefore, the answer is (B) $74,000.

Danahy Corporation Manufactures a Single Product