Morwenna,Inc.reports the following information for August: $$\begin{array} { | l | r | }
\hline \text { Sales Revenue } & \$ 900,000 \
\hline \text { Variable Cost of Goods Sold } & 120,000 \
\hline \text { Fixed Cost of Goods Sold } & 60,000 \
\hline \text { Variable Selling and Administrative Costs } & 150,000 \
\hline \text { Fixed Selling and Administrative Costs } & 50,000 \
\hline
\end{array}$$ Calculate the operating income for August using absorption costing.
A)$520,000
B)$270,000
C)$1,100,000
D)$380,000

Question

Morwenna,Inc.reports the following information for August: $$\begin{array} { | l | r | } 
\hline \text { Sales Revenue } & \$ 900,000 \
\hline \text { Variable Cost of Goods Sold } & 120,000 \
\hline \text { Fixed Cost of Goods Sold } & 60,000 \
\hline \text { Variable Selling and Administrative Costs } & 150,000 \
\hline \text { Fixed Selling and Administrative Costs } & 50,000 \
\hline
\end{array}$$ Calculate the operating income for August using absorption costing.
A)$520,000
B)$270,000
C)$1,100,000
D)$380,000

Quizplus · Accepted Answer

Absorption costing includes all manufacturing costs, both variable and fixed, as part of the cost of goods sold. Therefore, the operating income for August using absorption costing is calculated as follows:Sales Revenue - Total Cost of Goods Sold - Variable Selling and Administrative Costs - Fixed Selling and Administrative Costs= $900,000 - ($120,000 + $60,000) - $150,000 - $50,000= $520,000

Morwenna,Inc Calculate the Operating Income for August Using Absorption Costing