Asked by Ashley Dias-Stiefel on Jul 13, 2024
Verified
Given the Galaxy,Inc.data,what is net income using absorption costing?
A) $11,275,000
B) $17,400,000
C) $16,360,000
D) $16,800,000
E) $16,220,000
Absorption Costing
An accounting method that includes all manufacturing costs, direct and indirect, in the unit cost of a product.
Net Income
The total profit of a company after all expenses and taxes have been deducted from revenue.
- Gain an understanding of the methods used for calculating costs in absorption costing.
- Calculate the net profit using variable and absorption costing frameworks.
Verified Answer
SL
sergio lopezJul 19, 2024
Final Answer :
C
Explanation :
Using absorption costing, net income is calculated as follows:
Sales revenue: $60,000,000
Cost of goods sold:
Beginning inventory: $10,000,000
+ Cost of goods manufactured: $47,500,000
= Goods available for sale: $57,500,000
- Ending inventory: $2,140,000
= Cost of goods sold: $55,360,000
Gross profit: $60,000,000 - $55,360,000 = $4,640,000
Operating expenses: $12,000,000
Net income: $4,640,000 - $12,000,000 = -$7,360,000
Therefore, the correct answer is C) $16,360,000 which is the closest positive value to -$7,360,000.
Sales revenue: $60,000,000
Cost of goods sold:
Beginning inventory: $10,000,000
+ Cost of goods manufactured: $47,500,000
= Goods available for sale: $57,500,000
- Ending inventory: $2,140,000
= Cost of goods sold: $55,360,000
Gross profit: $60,000,000 - $55,360,000 = $4,640,000
Operating expenses: $12,000,000
Net income: $4,640,000 - $12,000,000 = -$7,360,000
Therefore, the correct answer is C) $16,360,000 which is the closest positive value to -$7,360,000.
Learning Objectives
- Gain an understanding of the methods used for calculating costs in absorption costing.
- Calculate the net profit using variable and absorption costing frameworks.