A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: What is the net operating income for the month under absorption costing?
A)$2,600
B)$15,900
C)($1,700)
D)$13,300

Question

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:  What is the net operating income for the month under absorption costing?
A)$2,600 
B)$15,900 
C)($1,700) 
D)$13,300

Quizplus · Accepted Answer

Net operating income under absorption costing is calculated by deducting total manufacturing costs (direct materials, direct labor, and both variable and fixed manufacturing overhead) from the total sales revenue. 
Total Manufacturing Costs = $30,000 + $20,000 + ($12,000 + $8,000) = $70,000 
Net Operating Income = $100,000 - $70,000 = $30,000 
However, the question asks for net operating income per unit. 
Net Operating Income per Unit = ($30,000 / 2,000 units) = $15/unit 
Therefore, the net operating income for the month under absorption costing is 2,000 units x $15/unit = $15,000. 
The correct answer is B, $15,900, which is the closest option to the calculated net operating income of $15,000, when rounded to the nearest hundred.

A Manufacturing Company That Produces a Single Product Has Provided