Patrick’s Water Pets Inc. makes 100-gallon plexiglass aquariums. They reported the following financial information for last year:Direct labor:4,200 hours @ $20 per hr.Production manager salary:$35,000Factory rent:$16,800Equipment maintenance:$7,000 (considered a variable expense)Equipment depreciation:$7,000Production for the year:12,000 unitsTotal Revenue:$700,000Total aquariums sold during the period:10,000 unitsOperating Income under absorption costing (after non-production expenses):$142,800Assume that the fixed costs were the same on a per-unit basis during the prior period.What would Operating Income be under absorption costing? (Round per-unit costs to the nearest cent.)Select one:a. $133,000b. $153,760c. None of these options are correct.d. $131,840e. $152,600

Absorption costing:Under absorption costing, the fixed overhead cost is allocated to the each unit…

Answered: Direct labor: 4,200 hours @ $20 per…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter2: Basic Cost Management Concepts

Section: Chapter Questions

Problem 28P: Brody Company makes industrial cleaning solvents. Various chemicals, detergent, and water are mixed...

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Question

Patrick’s Water Pets Inc. makes 100-gallon plexiglass aquariums. They reported the following financial information for last year:

Direct labor:	4,200 hours @ $20 per hr.
Production manager salary:	$35,000
Factory rent:	$16,800
Equipment maintenance:	$7,000 (considered a variable expense)
Equipment depreciation:	$7,000
Production for the year:	12,000 units
Total Revenue:	$700,000
Total aquariums sold during the period:	10,000 units
Operating Income under absorption costing (after non-production expenses):	$142,800

Assume that the fixed costs were the same on a per-unit basis during the prior period.

What would Operating Income be under absorption costing? (Round per-unit costs to the nearest cent.)

Select one:

a. $133,000

b. $153,760

c. None of these options are correct.

d. $131,840

e. $152,600

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