Answered: What is the net operating income this…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Company ABC produces a single product. This year the company produced 20,000 units but only sold 15,000 units at the price of $40 each. Variable manufacturing costs (including direct materials, director labor, and variable manufacturing overhead) total $10 per unit. Variable selling and administrative cost is $5 per unit. Fixed manufacturing overhead cost is $100,000 each year. Fixed selling and administrative cost is $100,000 each year. There is no inventory at the beginning of this year.

What is the net operating income this year using the absorption costing method? Please prepare the absorption costing income statement.
What is the net operating income this year using the variable costing method? Please prepare the variable costing income statement.

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