Reference no: EM132541932

Question 1: XYZ Inc. sells a single product for $30 per unit. Direct materials costs were $5 per unit, while direct labour and variable manufacturing overhead costs were $3 and $2 respectively. Fixed manufacturing overhead costs amount $20,000 per month. The company has a practical production capacity of 10,000 units per month. Variable selling costs are $2 per unit. Fixed selling costs are $2,000 per month. During the company's first month of operations, the company produced 9,000 units and sold 6,000 units. The company's operating income under absorption costing for its first month of operations would be:

Option a) the same as its variable costing operating income

Option b) $6000 higher than its variable costing operating income

Option c) $8000 lower than its variable costing operating income

Option d) $10,000 higher than its variable costing operating income