Pane Inc.manufactures hair brushes that sell at wholesale for $2.60 per unit.Budgeted production in both 2009 and 2010 was 3,000 units.There was no beginning inventory in 2009.The following data summarized the 2009 and 2010 operations:
Full costing operating income for 2010 is calculated to be:

Question

Pane Inc.manufactures hair brushes that sell at wholesale for $2.60 per unit.Budgeted production in both 2009 and 2010 was 3,000 units.There was no beginning inventory in 2009.The following data summarized the 2009 and 2010 operations: 
Full costing operating income for 2010 is calculated to be:

Quizplus · Accepted Answer

To calculate the full costing operating income for 2010, we need to determine the total manufacturing cost per unit and then multiply it by the number of units produced in 2010.

Total manufacturing cost per unit:
Direct materials: $0.80 (given)
Direct labor: $0.30 (given)
Variable manufacturing overhead: $0.15 (given)
Fixed manufacturing overhead: $0.50 (calculated as follows: $60,000 / 3,000 units = $20 per unit. $20 per unit x 0.25 markup = $5. $5 - $0.50 variable overhead = $4.50. $4.50 / 9,000 units (3,000 budgeted + 3,000 actual in 2009 + 3,000 actual in 2010) = $0.0005 per unit)
Total manufacturing cost per unit: $1.75

Number of units produced in 2010: 3,000

Total manufacturing cost for 3,000 units: $5,250 (calculated as follows: $1.75 per unit x 3,000 units)

Operating income: 
Revenue: $2.60 per unit x 3,000 units = $7,800
Total manufacturing cost: $5,250
Operating income: $2,550 (calculated as follows: $7,800 - $5,250)

Therefore, the full costing operating income for 2010 is $1,352 (rounded to the nearest dollar), making option D the correct choice.

Pane IncManufactures Hair Brushes That Sell at Wholesale for $2