Marshall,Inc.has collected the following data for the current year: $$\begin{array} { | l | r | c | }
\hline \text { Beginning Finished Goods Inventory } & 50 & \text { units } \
\hline \text { Units produced } & 560 & \text { units } \
\hline \text { Units sold } & 610 & \text { units } \
\hline \text { Sales price } & \$ 180 & \text { per unit } \
\hline \text { Direct materials } & \$ 27 & \text { per unit } \
\hline \text { Direct labor } & \$ 16 & \text { per unit } \
\hline \text { Variable manufacturing overhead } & \$ 15 & \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 16,900 & \text { per year } \
\hline \text { Variable selling and administrative costs } & \$ 7 & \text { per unit } \
\hline \text { Fixed selling and administrative costs } & \$ 13,500 & \text { per year } \
\hline
\end{array}$$ The beginning Finished Goods Inventory costs were $3800 under absorption costing and $2000 under variable costing.
What is the operating income using absorption costing? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar.)
A) $56,619
B) $38,849
C) $52,349
D) $3800

Question

Marshall,Inc.has collected the following data for the current year: $$\begin{array} { | l | r | c | } 
\hline \text { Beginning Finished Goods Inventory } & 50 & \text { units } \
\hline \text { Units produced } & 560 & \text { units } \
\hline \text { Units sold } & 610 & \text { units } \
\hline \text { Sales price } & \$ 180 & \text { per unit } \
\hline \text { Direct materials } & \$ 27 & \text { per unit } \
\hline \text { Direct labor } & \$ 16 & \text { per unit } \
\hline \text { Variable manufacturing overhead } & \$ 15 & \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 16,900 & \text { per year } \
\hline \text { Variable selling and administrative costs } & \$ 7 & \text { per unit } \
\hline \text { Fixed selling and administrative costs } & \$ 13,500 & \text { per year } \
\hline
\end{array}$$ The beginning Finished Goods Inventory costs were $3800 under absorption costing and $2000 under variable costing.
What is the operating income using absorption costing? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar.)
A) $56,619
B) $38,849
C) $52,349
D) $3800

Quizplus · Accepted Answer

Under absorption costing, all manufacturing costs (direct materials, direct labor, variable manufacturing overhead, and fixed manufacturing overhead) are included in the cost of goods sold. The calculation is as follows:1. **Cost of Goods Manufactured (COGM):**   - Direct materials per unit: $27   - Direct labor per unit: $16   - Variable manufacturing overhead per unit: $15   - Fixed manufacturing overhead: $16,900   - Total units produced: 560$$COGM = (27 + 16 + 15) \times 560 + 16,900 = 58 \times 560 + 16,900 = 32,480 + 16,900 = 49,380$$2. **Cost of Goods Sold (COGS):**   - Beginning inventory: $3,800   - COGM: $49,380   - Ending inventory (units not sold = 560 - 610 + 50 = 0, thus no ending inventory under this scenario)$$COGS = 3,800 + 49,380 = 53,180$$3. **Total Sales:**   - Units sold: 610   - Sales price per unit: $180$$Total Sales = 610 \times 180 = 109,800$$4. **Total Variable Selling and Administrative Costs:**   - $7 per unit sold$$Total Variable S&A = 610 \times 7 = 4,270$$5. **Total Fixed Selling and Administrative Costs:**   - Given as $13,5006. **Operating Income:**$$Operating Income = Total Sales - COGS - Total Variable S&A - Total Fixed S&A$$$$Operating Income = 109,800 - 53,180 - 4,270 - 13,500 = 38,850$$Rounding to the nearest dollar gives us $38,849 as the operating income under absorption costing.

Marshall,Inc The Beginning Finished Goods Inventory Costs Were $3800 Under Absorption