Question

Franz began business at the start of this year and had the following costs: variable manufacturing cost per unit, $9; fixed manufacturing costs, $60,000; variable selling and administrative costs per unit, $2; and fixed selling and administrative costs, $220,000. The company sells its units for $45 each. Additional data follow.Planned Production in units 10,000Actual Production in units%u2026..10,000Number of units sold 8,500There were no variances.The net income (loss) under absorption costing is:A. (7500)B. 9,000C. 15,00D. 18,000E. Some other amount

Answer 1

Answer:

The correct answer is D,$18000

Explanation:

Find detailed explanation and computation in the attached spreadsheet.

Answer 2

Answer:

B. $9000 Profit

Explanation:

Firstly we will calculate the total costing of the 8500 units that were sold as these are part of the net income or loss of the company.

We know that the variable costs are $9 per unit and $2 per unit as we are told that absorption costing is to be used so therefore we will take into consideration indirect expenses as well as direct costs. Total variable costs is $11 per unit and fixed costs are $60000 plus $220000 which is selling and administrative costs, therefore total costs = $11(8500) + $60000+$220000 = $373500 .

Now for the revenue we will say selling price times the number o units sold

$45 x 8500 = $382500

now for net income or loss= Revenue - Expenses

                                            = $382500 - $373500

                                              =$9000 which is the net income of the company