Question

Duif Company's absorption costing income statement for the last year of operations is presented below. Sales………………………………………………………………………………$70,000 Less cost of goods sold: Beginning inventory………………………………………. 0 Add cost of goods manufactured………………48,000 Goods available for sale……………………………..48,000 Less ending inventory…………………………………6,000 Cost of goods sold…………………………………………………………..42,000 Gross margin…………………………………………………………………….28,000 Less selling and admin. expenses……………………………………. 25,000 Net operating income……………………………………………………….$3,000 Data on units produced and sold for the year are given below. Units in beginning inventory……………………………..0 Units produced…………………………………………….8,000 Units sold…………………………………………………….7,000 Variable manufacturing costs are $4 per unit. Fixed manufacturing overhead totaled $16,000 for the year. The fixed manufacturing overhead was applied to products at a rate of $2 per unit. Variable selling and administrative expenses were $3 per unit sold.

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