Answer the following questions using the information below:
Barry's Hobbies produces and sells a luxury animal pillow for $80.00 per unit. In the first month of operation, 3,000 units were produced and 2,250 units were sold. Actual fixed costs are the same as the amount budgeted for the month. Other information for the month includes:

-What is operating income when using absorption costing?
A)$8,000
B)$33,000
C)($23,500)
D)$37,500

Question

Answer the following questions using the information below:
Barry's Hobbies produces and sells a luxury animal pillow for $80.00 per unit. In the first month of operation, 3,000 units were produced and 2,250 units were sold. Actual fixed costs are the same as the amount budgeted for the month. Other information for the month includes:
 
-What is operating income when using absorption costing?
A)$8,000 
B)$33,000 
C)($23,500) 
D)$37,500

Quizplus · Accepted Answer

Operating income when using absorption costing is calculated as sales revenue minus total expenses, including both variable and fixed manufacturing costs. In this case, sales revenue is $40,000, variable manufacturing costs are $7,500, and fixed manufacturing costs are $25,000. Therefore, operating income is $40,000 - $7,500 - $25,000 = $33,000.

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