Manufacturing of iphone 7 at the year end December 2016: selling and administrative costs: fixed $400000 variable per unit $25 each total sales units 340000 @ $210 each, manufacturing costs: fixed $11000000 variable cost per unit $120 each balance in finished units at the start of the year 90000, balance in finished units at the close of the year 150000 then net income under absorption cost

A. 12,250,000 USD

B. 21,125,000 USD

C. 12,350,000 USD

D. 12,500,000 USD

Answer: Option C

Solution(By Examveda Team)

Cost per unit = Variable product costs/unit + Fixed manufacturing overheads/unit
= 120 + 11000000/400000 = 120 + 27.5
= 147.5
Total revenue (A)=$ 71400000
Cost of goods sold (B)=$ 50150000
Gross profit (C) = (A) - (B) =$ 21250000
Variable selling & administrative expenses (D) = 25 x 340000 =$ 8500000
Fixed selling & admin costs (E) =$ 400000
Net income under absorption cost = (C) - (D) - (E) =$ 12350000