Fasetech, Inc. has collected the following data.? (There are no beginning? inventories.)

Units produced

510

units

Sales price

?$150

per unit

Direct materials

?$16

per unit

Direct labor

?$10

per unit

Variable manufacturing overhead

?$10

per unit

Fixed manufacturing overhead

?$16,000

per year

Variable selling and administrative costs

?$9

per unit

Fixed selling and administrative costs

?$10,500

per year

What is the operating income using absorption costing if 500 units are? sold? (Round any intermediate calculations to the nearest? cent, and your final answer to the nearest? dollar.)

A.?$27,500

B.?$38,315

C.?$26,315

D.?$31,641

The correct answer is C.

Explanation:

Giving the following information:

Units produced = 510 units

Sales price = $150 per unit

Direct materials = $16 per unit

Direct labor = $10 per unit

Variable manufacturing overhead = $10 per unit

Fixed manufacturing overhead = $16,000 per year

Variable selling and administrative costs = $9 per unit

Fixed selling and administrative costs = $10,500 per year

Units sold = 500

Under the absorption costing method, the fixed overhead costs get allocated as a product cost.

Unitary fixed overhead = 16,000/510 = $31.37

Total unitary cost = direct material + direct labor + total overhead

TUC = 16 + 10 + (10 + 31.37) = $67.37

Income statement:

Sales = 500*150 = 75,000

COGS = 67.37*500 = (33,685)

Gross profit = 41,315

Total variable selling and administrative costs = (9*500) = (4,500)

Fixed selling and administrative costs = (10,500)

Net operating profit = 26,315