Aaker corporation, which has only one product, has provided the following data concerning its most recent month of operations: selling price $99 units in beginning inventory 0 units produced 6,300 units sold 6,000 units in ending inventory 300 variable costs per unit: direct materials $12 direct labor $42 variable manufacturing overhead $6 variable selling and administrative $6 fixed costs: fixed manufacturing overhead $170,100 fixed selling and administrative $24,000 what is the net operating income for the month under absorption costing? $3,900 ($14,100) $12,000 $8,100

Net Income = $12,000

Explanation:

Under absorption costing cost allocated to cost of goods sold = Prime cost + Manufacturing overheads. That is selling and administrative cost is not allocated.

Computing Net Income

No of units = 6,000

Sales 6,000 X $99 = $594,000

Less: Cost of Goods Sold

Direct Material = $12 X 6,000 = $72,000

Add: Direct Labor = $42 X 6,000 = $252,000

Add: Variable Manufacturing Overhead = $6 X 6,000 = $36,000

Add: Fixed manufacturing overhead = ($170,100/6,300) X 6,000 = $162,000

Total cost of goods sold = $522,000

Gross Margin = $72,000

Less: Operating Cost

Selling And Distribution

Variable $6 X 6000 = $36,000

Fixed = $24,000

Total Operating cost = $60,000

Net Income = $12,000

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