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25 September, 21:14

Production costs (20,900 units) : Direct materials $176,800 Direct labor 235,700 Variable factory overhead 240,300 Fixed factory overhead 102,900 $755,700 Operating expenses: Variable operating expenses $132,000 Fixed operating expenses 43,400 175,400 If 1,900 units remain unsold at the end of the month and sales total $1,158,000 for the month, what would be the amount of income from operations reported on the absorption costing income statement

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  1. 26 September, 01:00
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    income from operations is $295,604

    Explanation:

    Absorption Costing included both the Variable and Fixed Manufacturing overheads in product cost.

    All Non-Manufacturing Costs are treated as period costs

    Total Manufacturing Cost = 176,800 + 235,700 + 240,300 + 102,900

    = 755,700

    Product Cost = Total Manufacturing Costs / Total Units of Production

    = $755,700 / 20,900 units

    = $ 36.16

    absorption costing income statement

    Sales $1,158,000

    Less Cost of Goods Sold

    Opening Stock 0

    Add Cost of Goods Manufactured $755,700

    Less Closing Stock ($ 36.16*1,900 units) ($68,704) ($686,996)

    Gross Profit $471,004

    Less Expenses

    Operating expenses: Variable operating expenses ($132,000)

    Fixed operating expenses ($43,400)

    Net Income $295,604

    Therefore, income from operations is $295,604
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