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27 February, 13:16

Required information SB Advanced Company reports the following ... [The following information applies to the questions displayed below.] Advanced Company reports the following information for the current year. All beginning inventory amounts equaled $0 this year. Units produced this year 30,000 units Units sold this year 18,000 units Direct materials $ 14 per unit Direct labor $ 16 per unit Variable overhead $ 90,000 in total Fixed overhead $ 150,000 in total MC Qu. 95 Given Advanced Company's data ... Given Advanced Company's data, and the knowledge that the product is sold for $61 per unit and operating expenses are $250,000, compute the net income under absorption costing.

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  1. 27 February, 13:30
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    Answer: $164,000

    Explanation:

    Given the following;

    All beginning inventory amounts equaled $0.

    Units produced = 30,000 units Units sold = 18,000 units

    Direct materials = $ 14 per unit Direct labor = $ 16 per unit

    Sales price = $61

    Variable overhead=$90,000 in total Fixed overhead = $150,000 in total

    Under absorption costing, overhead cost is added to the production cost.

    Therefore,

    Variable overhead cost per unit = $90,000 : $30,000 = $3 per unit

    Fixed overhead cost per unit = $150,000 : 30,000 = $5 per unit

    Total cost per unit = $ (14 + 16 + 3 + 5) = $38

    Total unit sold * total cost per unit

    18,000 * $38 = $684,000

    Total units sold * price per unit

    $18,000 * $61 = $1,098,000

    $1,098,000 - 684,000 = $414,000

    Net income = $414,000 - operating expenses

    Net income = $414,000 - $250,000 = $164,000
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