3. ( TCO E) Hanks Company produces a single product. Operating data for the company and its absorption costing income statement for the last year is presented below.
Units in beginning inventory................................... 0
Units produced............................................... 9,000
Units sold...................................................... 8,000
Sales.........................................................$ 80,000
Less cost of goods sold:
Beginning inventory.............................................. 0
Add cost of goods manufactured.................. 54,000
Goods available for sale............................... 54,000
Less ending inventory.................................... 6,000
Cost of goods sold...................................... 48,000
Gross margin.............................................. 32,000
Less selling and admin. expenses................. 28,000
Net operating income................................$ 4,000
Variable manufacturing costs are $ 4 per unit. Fixed factory overhead totals $ 18,000 for the year. This overhead was applied at a rate of $ 2 per unit. Variable selling and administrative expenses were $ 1 per unit sold.