Farron Corporation,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)($17,000)
B)$16,600
C)$6,000
D)$10,600

Question

Farron Corporation,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)($17,000) 
B)$16,600 
C)$6,000 
D)$10,600

Quizplus · Accepted Answer

The net operating income under absorption costing can be calculated as follows:
Sales revenue $100,000
Less: Cost of goods sold ($54,000 + $28,000) $82,000
Gross profit $18,000
Less: Selling and administrative expenses $1,400 + $400 + $800 $2,600
Net operating income $15,400
Therefore, the correct answer is B, which is $16,600 ($15,400 + $1,200 underapplied overhead).

Farron Corporation,which Has Only One Product,has Provided the Following Data