Leeds Electronics, which has only one product, has provided the following data concerning its most recent month of operations:
-What is the net operating income for the month under absorption costing?

A)£8,700
B)£5,700
C)£14,400
D)(£12,000)

Question

Leeds Electronics, which has only one product, has provided the following data concerning its most recent month of operations:
-What is the net operating income for the month under absorption costing?

A)£8,700 
B)£5,700 
C)£14,400 
D)(£12,000)

Quizplus · Accepted Answer

To calculate the net operating income using absorption costing, we need to deduct all the manufacturing costs of the product from the total sales revenue.

Total manufacturing costs = Direct materials + Direct labor + Variable manufacturing overhead + Fixed manufacturing overhead
= £72,000 + £15,000 + £18,000 + £24,000
= £129,000

Net operating income = Total sales revenue - Total manufacturing costs
= £143,400 - £129,000
= £14,400

Therefore, the net operating income for the month under absorption costing is £14,400.

Leeds Electronics, Which Has Only One Product, Has Provided the Following