Atlanta, Inc., planned and actually manufactured 180,000 units of its single product in 2017, its first year of operation. Variable manufacturing cost was $ 17 per unit produced. Variable operating (nonmanufacturing) cost was $ 10 per unit sold. Planned and actual fixed manufacturing costs were $ 900,000. Planned and actual fixed operating (nonmanufacturing) costs totaled $ 360,000. Atlanta sold 120, 000 units of product at $ 44 per unit. Required:
Atlanta 's 2017 operating income using absorption costing is:

a. $ 530,000
b. $ 370,000
c. $ 740,000
d. $900,000
e. none of these.

Net operating income= 1,080,000

Explanation:

Giving the following information:

Units produced= 180,000

Variable manufacturing cost was $ 17 per unit produced.

The variable operating (nonmanufacturing) cost was $ 10 per unit sold.

Planned and actual fixed manufacturing costs were $ 900,000. Planned and actual fixed operating (nonmanufacturing) costs totaled $ 360,000.

Atlanta sold 120, 000 units of a product at $ 44 per unit.

The absorption costing method includes all costs related to production, both fixed and variable. The unit product cost is calculated using direct material, direct labor, and total unitary manufacturing overhead.

Unitary fixed overhead= 900,000/180,000= $5

Unitary production cost= 17 + 5= 22

Sales= 120,000*44= 5,280,000

COGS= 22*120,000= (2,640,000)

Gross profit= 2,640,000

The variable operating ocsts=  120,000*10= (1,200,000)

Fixed operating costs= (360,000)

Giving the following information:

Units produced= 180,000

Variable manufacturing cost was $ 17 per unit produced.

The variable operating (nonmanufacturing) cost was $ 10 per unit sold.

Planned and actual fixed manufacturing costs were $ 900,000. Planned and actual fixed operating (nonmanufacturing) costs totaled $ 360,000.

Atlanta sold 120, 000 units of a product at $ 44 per unit.

The absorption costing method includes all costs related to production, both fixed and variable. The unit product cost is calculated using direct material, direct labor, and total unitary manufacturing overhead.

Unitary fixed overhead= 900,000/180,000= $5

Unitary production cost= 17 + 5= 22

Sales= 120,000*44= 5,280,000

COGS= 22*120,000= (2,640,000)

Gross profit= 2,640,000

The variable operating ocsts=  120,000*10= (1,200,000)

Fixed operating costs= (360,000)

Net operating income= 1,080,000

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