For the month ended October 31^st, there are no finished goods or work in process inventories at the beginning of the month for the Fleetfoot Company. Net sales $8,400
Product costs:
Variable 3,780
Fixed 1,890
Selling and Administrative costs:
Variable 588
Fixed 840
Units manufactured 210
Units sold 180
Under absorption costing, Fleetfoot's operating income for the year is:

Question

Quizplus · Accepted Answer

Under absorption costing, fixed manufacturing overhead costs are included in the cost of goods sold. Therefore, to calculate operating income, we need to allocate fixed manufacturing overhead costs to the units produced.

Variable cost per unit = ($3,780/210) = $18
Fixed cost per unit = ($1,890/210) = $9

Total cost per unit = $18 + $9 = $27

Total cost of goods sold = 180 * $27 = $4,860

Total operating expenses = ($588/210 + $840/210) * 180 = $2,520

Operating income = Net sales - Cost of goods sold - Operating expenses
= $8,400 - $4,860 - $2,520
= $1,020 + $1,092
= $2,112

Therefore, the correct answer is A) $2,112.

For the Month Ended October 31st, There Are No Finished

For the Month Ended October 31^st, There Are No Finished