Farris Corporation, which has only one product, has provided the following data concerning its most recent month of operations:

Farris Corporation, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price	$	132
Units in beginning inventory		0
Units produced		9,200
Units sold		8,800
Units in ending inventory		400

Variable costs per unit:
Direct materials	$	23
Direct labor	$	65
Variable manufacturing overhead	$	11
Variable selling and administrative expense	$	15
Fixed costs:
Fixed manufacturing overhead	$	138,000
Fixed selling and administrative expense	$	9,300

What is the net operating income for the month under absorption costing?

Multiple Choice

• $11,100
• $6,000
• $17,100

  Correct
• $28,500

Explanation

Direct materials	$	23
Direct labor		65
Variable manufacturing overhead		11
Fixed manufacturing overhead cost ($138,000 ÷ 9,200 units produced)		15
Absorption costing unit product cost	$	114

Sales ($132 per unit × 8,800 units)	$	1,161,600
Cost of goods sold ($114 per unit × 8,800 units)		1,003,200
Gross margin		158,400
Selling and administrative expenses ($15 per unit × 8,800 units + $9,300)		141,300
Net operating income	$	17,100