Donovan Company incurred the following costs while producing 500 units: direct materials $10 per unit, direct labour $25 per unit, variable manufacturing overhead, $15 per unit, total fixed overhead costs, $10,000; variable selling and administrative costs, $5 per unit; total fixed selling and administrative costs, $7,500. There are no beginning inventories.
What is the operating income using absorption costing if 500 units are sold for $100 each?
a. $500
b. $2,500
c. $2,750
d. $5,000
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