Direct labor: 4,200 hours @ $20 per hr. Production manager salary: $35,000 Factory rent: $16,800 Equipment maintenance: $7,000 (considered a variable expense) Equipment depreciation: $7,000 Production for the year: 12,000 units Total Revenue: $700,000 Total aquariums sold during the period: 10,000 units Operating Income under absorption costing (after non-production expenses): $142,8

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Patrick’s Water Pets Inc. makes 100-gallon plexiglass aquariums. They reported the following financial information for last year:

Direct labor: 4,200 hours @ $20 per hr.
Production manager salary: $35,000
Factory rent: $16,800
Equipment maintenance: $7,000 (considered a variable expense)
Equipment depreciation: $7,000
Production for the year: 12,000 units
Total Revenue: $700,000
Total aquariums sold during the period: 10,000 units
Operating Income under absorption costing (after non-production expenses): $142,800

Assume that the fixed costs were the same on a per-unit basis during the prior period.

What would Operating Income be under absorption costing? (Round per-unit costs to the nearest cent.)

Select one:
a. $133,000
b. $153,760
c. None of these options are correct.
d. $131,840
e. $152,600
 
 
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