Question

Aces Inc., a manufacturer of tennis rackets, began operations this year. The company produced 6,000 rackets and sold 4,900. Each racket was sold at a price of \(90. Fixed overhead costs are \)78,000, and fixed selling and administrative costs are \(65,200. The company also reports the following per unit costs for the year. Prepare an income statement under absorption costing.

Variable production cost	\)25
Variable selling and administrative expenses	$2

Short answer

Answer

The net income of the business entity is$179,800.

Step-by-step solution

Definition of Net Income

The net benefit generated after adjusting every expense incurred is known as net income. It is also adjusted with the tax and interest paid by the business entity.

Income statement under absorption costing

Particular	Amount $
Sales 4,900 units @ $90 per unit	$441,000
Less:
Variable production cost @ $25 per unit	(122,500)
Fixed overhead cost $\left(\frac{\$78,000}{6,000}\times 4,900\right)$	(63,700)
Gross profit	$254,800
Less:
Variable Selling and administrative expenses @ $2 per unit	(9,800)
Fixed selling and administrative expenses	(65,200)
Net income	$179,800