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Question: Computing absorption costing operating income

Refer to the information for Concord, Inc.

Requirements

1. Using absorption costing, calculate the unit product cost.
2. Prepare an income statement using the traditional format.

Use the following information for Exercises E21-14 and E21-15.

Concord, Inc. has collected the following data for November (there are no beginning inventories):

Units produced and sold 500 units Sales price $ 450 per unit Direct materials 64 per unit Direct labor 68 per unit Variable manufacturing overhead 26 per unit Fixed manufacturing overhead 7,500 per month Variable selling and administrative costs 15 per unit Fixed selling and administrative costs 4,400 per month

Step by step solution

01

Calculation of unit product cost using absorption costing

Particulars	Amount
Direct materials	$64
Direct labor	$68
Variable manufacturing overhead	$26
Fixed manufacturing overhead ($7,500/500)	$15
Total unit product cost	$173

02

Income statement using absorption costing

Particulars	Amount
Net sales revenue ($450x500)	$225,000
Less: Cost of goods sold (173x500)	$86,500
Gross profit	$138,500
Less: Selling and administrative cost
Variable selling and administrative cost ($15x500)	$7,500
Fixed selling and administrative cost	$4,400
Operating Income	$126,600

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