3 April, 11:40

# Company has 130 units in Finished Goods Inventory at the beginning of the accounting period. During the accounting period, Hacken produced 190 units and sold 320 units for \$ 250 each. All units incurred \$ 55 in variable manufacturing costs and \$ 30 in fixed manufacturing costs. Hacken also incurred \$ 7 comma 700 in Selling and Administrative Costs, all fixed. Calculate the operating income for the year using absorption costing and variable costing.

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1. 3 April, 12:09
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The operating income for the year using absorption costing and variable costing is \$45,100 and \$49,000 respectively

Explanation:

The computation of the operating income for the year using absorption costing and variable costing is shown below:

Absorption costing:

Sales (320 units * \$250) \$80,000

Less: Total manufacturing cost (320 units * \$85) (\$27,200)

Contribution margin \$52,800

Less: Selling and Administrative Costs (\$7,700)

Net income \$45,100

Variable costing:

Sales (320 units * \$250) \$80,000

Less: Variable cost (320 units * \$55) (\$17,600)

Contribution margin \$62,400

Less: Fixed manufacturing costs (190 units * \$30) \$5,700

Less: Selling and Administrative Costs (\$7,700)

Net income \$49,000