Alltech Inc What Is the Operating Income Using Absorption Costing If 500

question 60

Multiple Choice

Alltech Inc. has collected the following data. (There are no beginning inventories.) $$\begin{array} { | l | r | l | } \hline \text { Units produced } & 510 & \text { units } \\\hline \text { Sales price } & \$ 120 & \text { per unit } \\\hline \text { Direct materials } & \$ 19 & \text { per unit } \\\hline \text { Direct labor } & \$ 15 & \text { per unit } \\\hline \text { Variable manufacturing overhead } & \$ 9 & \text { per unit } \\\hline \text { Fixed manufacturing overhead } & \$ 16,000 & \text { per year } \\\hline \text { Variable selling and administrative costs } & \$ 10 & \text { per unit } \\\hline \text { Fixed selling and administrative costs } & \$ 12,100 & \text { per year } \\\hline\end{array}$$ What is the operating income using absorption costing if 500 units are sold? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.)

• A) $6600
• B) $5715
• C) $11,171
• D) $19,015

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Definitions:

Fixed Costs

Expenses that do not change with the level of production or sales in the short term, such as rent, salaries, or insurance premiums.

Unitised

Refers to the conversion of a product or service into quantifiable units, typically for ease of calculation, tracking, or comparison.

Special Decisions

Decisions made in unique or non-recurring situations requiring specific analysis or responses.

Annual Operating Costs

The total expenses associated with the day-to-day functioning of a business or project over one year.