Question

Denver, Inc, planned and actually manufactured 220,000 units of its single product in 2017 its first year of operation. Variable manufacturing cost was $20 per unit produced. Variable operating (nonmanufacturing) cost was $11 per unit sold. Planned and actual fixed manufacturing costs were $440,000. Planned and actual fixed operating (nonmanufacturing) costs totaled $380,000. Denver sold 110,000 units of product at $39 per unit.

Begin by selecting the labels used in the absorption costing calculation of operating income and enter the supporting amounts. Performed. tbe calculations in this steps but select the correct operating income in the next step.

Denver, Inc., planned and actually manufactured 220,000 units of its single product in 2017, its first year of operation Variable manufactun fixed manufacturing costs were $440,000. Planned and actual fixed operating (nonmanufacturing) costs totaled $380,000. Denver sold 110 Read the requirements Begin by selecting the labels used in the absorption costing calculation of operating income and enter the supporting amounts. Perform the sure to enter "0" in the appropriate cell.) Absorption costing Operating income Choose from any list or enter any number in the input fields and then click Check Answer. Clear All

1. Denver's 2017 operating income using absorption costing is (a) $280,000, (b) $60,000 (c) $440,000 (d) $660,000 or (e) none of these. Show supporting calculations.
2. Denver's 2017 operating income using variable costing is (a) $500,000 (b) $280,000 (c) $60,000 (d) $440,000 or (e) none of these. Show supporting calculations.

Answer 1

1. Denver's 2017 operating income using absorption costing is : (a) $280,000

Absorption costing
Revenue (110,000 x $39)		$4,290,000
Cost of goods sold:
Variable manufacturing costs (110,000 x $20)	$2,200,000
Allocated fixed manufacturing costs ($440,000 x 110,000/220000)	$220,000	$2,420,000
Gross margin		$1,870,000
Operating costs:
Variable operating (110,000 x $11)	$1,210,000
Fixed operating	$380,000	$1,590,000
Operating income		$280,000