A manufacturing company that produces a single product has p

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:

Selling price -------------------------------------- $126

Units in beginning inventory ------------------- 0

Units produced ---------------------------------- 8,500

Units sold ----------------------------------------- 8,300

Units in ending inventory --------------------- 200

Variable costs per unit:

Direct materials ------------------------------- $36

Direct labor ------------------------------------ $52

Variable manufacturing overhead --------- $2

Variable selling and administrative ------- $9

Fixed costs:

Fixed manufacturing overhead ----------- $127,500

Fixed selling and administrative ---------- 91,300

What is the net operating income for the month under absorption costing?

$5,300

$3,000

($12,700)

$8,300

$8,300

Working:

$8,300

Working:

Under Absorbtion costing, fixed manufacturing overhead is treated as product cost.It means fixed maufacturing overhead is assigned to each unit.

Fixed Manufacturing overhead per unit	=	$ 1,27,500	/	8,500	=	$ 15.00

Now, unit cost of goods sold is calculated as follows:

Direct Materials			$ 36
Direct Labor			$ 52
Variable Manufactturing overhead	$ 2
Fixed Manufacturing Overhead	$ 15

Cost of goods sold			$ 105

Now, Net Operating income is calculated as follows:
				Per Unit	Total
Sales				$ 126	$ 10,45,800
Cost of goods sold			$ 105	$ 8,71,500
Gross Profit			$ 21	$ 1,74,300
Selling and admnistrative expense:
Variable				$ 9.00	$ 74,700
Fixed					$ 91,300
Net Operating Income			$ 8,300