Given the Cool Pools Company data, what is net income using absorption costing?
Cool Pools, a manufacturer of above ground pools, began operations on January 1 of the current year. During this time, the company produced 45,000 units and sold 44,000 units at a sales price of $60 per unit. Cost information for this year is shown in the following table:
A) $1,649,480
B) $1,648,600
C) $1,627,150
D) $1,709,480
E) $1,708,600
A) $1,649,480
Explanation: Sales = $60(44,000) = $2,640,000
Variable overhead production costs per unit = $315,000/45,000 units = $7 per unit
Fixed overhead production costs per unit = $39,600/45,000 units = $0.88 per unit
COGS = DM + DL + VOH + FOH
[($11.25 + $3.20 + $7.00 + $0.88) × 44,000 units] = $982,520
Sales - COGS - Nonproduction costs = Net income
$2,640,000 - $982,520 - $2,000 - $6,000 = $1,649,480
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