Eagle Corporation manufactures a picnic table. Shown below is Eagle's cost structure:
|
Variable cost per table | Total fixed cost for the year | |
Manufacturing cost | $110 | $274,750 |
Selling and administrative | $10 | $35,168 |
In its first year of operations, Eagle produced and sold 10,990 tables. The tables sold for $181 each.
|
How would Eagle's absorption costing net operating income be affected in its first year if 13,010 tables were produced instead of 10,990 and Eagle still sold 10,990 tables? (Round your intermediate calculations to 2 decimal places.)
|
net operating income would have been $131,641 lower | |
net operating income would have been $42,641 higher | |
net operating income would have been $47,141 higher | |
net operating income would not have been affected |
Absorption costing income statement with production and sales of 10,990 units:
|
Variable manufacturing cost | $110.00 |
Fixed manufacturing cost ($274,750 ÷ 10,990 units produced) |
25.00
|
Absorption costing unit product cost |
$135.00
|
Sales ($181 per unit × 10,990 units) | $1,989,190.00 |
Cost of goods sold ($135.00 per unit × 10,990 units) |
1,483,650.00
|
Gross margin | 505,540.00 |
Selling and administrative expenses ($10 per unit × 10,990 units + $35,168) |
145,068.00
|
Net operating income |
$ 360,472.00
|
Absorption costing income statement with production of 13,010 units and sales of 10,990 units:
|
Variable manufacturing cost | $110.00 |
Fixed manufacturing cost ($274,750 ÷ 13,010 units produced) |
21.12
|
Absorption costing unit product cost |
$131.12
|
Sales ($181 per unit × 10,990 units) | $1,989,190.00 |
Cost of goods sold ($131.12 per unit × 10,990 units) |
1,441,008.80
|
Gross margin | 548,181.20 |
Selling and administrative expenses ($10 per unit × 10,990 units + $35,168) |
145,068.00
|
Net operating income |
$ 403,113.20
|
Therefore, net operating income would have been $42,641 higher (= $403,113.20 - $360,472.00) |
No comments:
Post a Comment