Hagman Company has 110 units in Finished Goods Inventory at the beginning of the accounting period. During the accounting period, Hagman produced 190 units and sold 300 units for $ 250 each. All units incurred $ 75 in variable manufacturing costs and $ 22 in fixed manufacturing costs. Hagman also incurred $ 7 comma 400 in Selling and Administrative Costs, all fixed. Calculate the operating income for the year using absorption costing and variable costing.

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facundobuzzetti facundobuzzetti · Answer 1 · 2019-10-10T19:53:19+02:00

Answer:

Instructions are listed below

Explanation:

Giving the following information:

Beginning Finished Goods Inventory 110 units

During the accounting period:

Produced 190 units

Sold 300 units for $ 250 each.

All units incurred $ 75 in variable manufacturing costs

$ 22 in fixed manufacturing costs.

Hagman also incurred $ 7400 in Fixed Selling and Administrative Costs.

Absorption:

Cost of goods sold= (variable manufacturing costs + fixed manufacturing costs)*units sold= (75+22)*300= 29,100

Operating income= sales - cogs - fixed selling and administrative costs= 75000 - 29100 - 7400= $38,500

Variable:

Variable costs= 75*300= 22500

Operating income= sales - variable costs - fixed manufacturing costs (of production) - fixed selling and administrative costs=

Operating income= 75000 - 225000 - (22*190) - 7400= $40,920