What is Red and White's net income under absorption costing if 980 units are sold and operating expenses are $12,000?
A) $(1,380)
B) $(2,000)
C) $2,700
D) $6,620
E) $10,620

Question

Quizplus · Accepted Answer

Absorption costing includes fixed manufacturing costs as product costs. The fixed manufacturing costs are $4,000. The total manufacturing costs are $16,000 ($12,000 + $4,000). The cost per unit is $16.33 ($16,000 / 980 units). The total sales revenue is $19,600 ($20 x 980 units). The net income is $2,700 ($19,600 - $16,900).

What Is Red and White's Net Income Under Absorption Costing