Morwenna,Inc.reports the following information for August: $$\begin{array} { | l | r | }
\hline \text { Sales Revenue } & \$ 800,000 \
\hline \text { Variable Cost of Goods Sold } & 110,000 \
\hline \text { Fixed Cost of Goods Sold } & 65,000 \
\hline \text { Variable Selling and Administrative Costs } & 130,000 \
\hline \text { Fixed Selling and Administrative Costs } & 65,000 \
\hline
\end{array}$$ Calculate the operating income for August using absorption costing.

Question

Morwenna,Inc.reports the following information for August: $$\begin{array} { | l | r | } 
\hline \text { Sales Revenue } & \$ 800,000 \
\hline \text { Variable Cost of Goods Sold } & 110,000 \
\hline \text { Fixed Cost of Goods Sold } & 65,000 \
\hline \text { Variable Selling and Administrative Costs } & 130,000 \
\hline \text { Fixed Selling and Administrative Costs } & 65,000 \
\hline
\end{array}$$ Calculate the operating income for August using absorption costing.

Quizplus · Accepted Answer

Absorption costing includes both variable and fixed manufacturing costs in the cost of goods sold. In this case, the fixed cost of goods sold is $65,000. Therefore, the operating income for August using absorption costing is $800,000 - $110,000 - $65,000 - $130,000 - $65,000 = $430,000.

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