What is the net operating income for the month under absorption costing?
A)$2,100
B)$25,900
C)$18,500
D)$17,800

Question

Quizplus · Accepted Answer

The net operating income under absorption costing is calculated as follows:
Sales - Cost of goods sold (direct materials, direct labor, variable manufacturing overhead, and fixed manufacturing overhead) = Gross margin - Selling and administrative expenses = Net operating income
Using the given information, we have: 
Sales = $150,000 
Direct materials = $27,000 
Direct labor = $15,000 
Variable manufacturing overhead = $6,500 
Fixed manufacturing overhead = $50,000 
Total cost of goods sold = $98,500 
Gross margin = $51,500 
Selling and administrative expenses = $33,700 
Net operating income = $17,800 
Therefore, the correct answer is D.

What Is the Net Operating Income for the Month Under