Tyson Manufacturing
Tyson Manufacturing has the following cost information available for 2009:
$\begin{array}{lr}
\text { Direct materials } & \$ 6.00 \text { per unit } \
\text { Direct labour } & \$ 2.00 \text { per unit } \
\text { Variable manufacturing overhead } & \$ 1.50 \text { per unit } \
\text { Variable selling and administrative costs } & \$ 3.00 \text { per unit } \
\text { Fixed manufacturing overhead } & \$ 40000 \
\text { Fixed selling and administrative costs } & \$ 50000
\end{array}$
During 2009, Tyson produced 10 000 units out of which 9100 units were sold for $50 each.
-What is net income under absorption costing?

Question

Tyson Manufacturing
Tyson Manufacturing has the following cost information available for 2009:
$\begin{array}{lr}
\text { Direct materials } & \$ 6.00 \text { per unit } \
\text { Direct labour } & \$ 2.00 \text { per unit } \
\text { Variable manufacturing overhead } & \$ 1.50 \text { per unit } \
\text { Variable selling and administrative costs } & \$ 3.00 \text { per unit } \
\text { Fixed manufacturing overhead } & \$ 40000 \
\text { Fixed selling and administrative costs } & \$ 50000
\end{array}$ 
During 2009, Tyson produced 10 000 units out of which 9100 units were sold for $50 each.
-What is net income under absorption costing?

Quizplus · Accepted Answer

Under absorption costing, net income is calculated as follows:
Sales revenue - Cost of goods sold (which includes both variable and fixed manufacturing costs) - Selling and administrative expenses = Net income
Plugging in the numbers given in the question:
$800,000 - ($400,000 + $245,000 + $109,150) - $1,800 = $254,850
Therefore, the correct answer is B.

Tyson Manufacturing Tyson Manufacturing Has the Following Cost Information Available

Tyson Manufacturing
Tyson Manufacturing Has the Following Cost Information Available