Hagman Company has 110 units in Finished Goods Inventory at the beginning of the accounting period. During the accounting period, Hagman produced 190 units and sold 300 units for $ 250 each. All units incurred $ 75 in variable manufacturing costs and $ 22 in fixed manufacturing costs. Hagman also incurred $ 7 comma 400 in Selling and Administrative Costs, all fixed. Calculate the operating income for the year using absorption costing and variable costing.

Instructions are listed below

Explanation:

Giving the following information:

Beginning Finished Goods Inventory 110 units

During the accounting period:

Produced 190 units

Sold 300 units for $ 250 each.

All units incurred $ 75 in variable manufacturing costs

$ 22 in fixed manufacturing costs.

Hagman also incurred $ 7400 in Fixed Selling and Administrative Costs.

Absorption:

Cost of goods sold = (variable manufacturing costs + fixed manufacturing costs) * units sold = (75+22) * 300 = 29,100

Operating income = sales - cogs - fixed selling and administrative costs = 75000 - 29100 - 7400 = $38,500

Variable:

Variable costs = 75*300 = 22500

Operating income = sales - variable costs - fixed manufacturing costs (of production) - fixed selling and administrative costs=

Operating income = 75000 - 225000 - (22*190) - 7400 = $40,920