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Ouvert Ltd

4. Selected comparative cost and revenue information for Ouvert Ltd. is provided.

Year 1 Year 2
Sales in units 700,000 800,000
Production in units 900,000 700,000
Standard volume in units 900,000 900,000
Sales price per unit $27.50 $27.50
Variable manufacturing cost per unit $8.00 $8.00
Fixed manufacturing overhead $3,600,000 $3,600,000
Fixed selling and administrative costs $10,500,000 $10,500,000

Ouvert uses a standard costing system, and that any volume variances are written off to cost of goods sold. Assuming absorption costing, what is the Year 2 operating income?

a. $1,100,000
b. $1,900,000
c. $2,700,000
d. $4,300,000
e. $5,100,000

Solution Preview

4. Selected comparative cost and revenue information for Ouvert Ltd. is provided.

Year 1 Year 2
Sales in units 700,000 800,000
Production in units 900,000 700,000
Standard volume in units 900,000 900,000
Sales price per unit $27.50 $27.50
Variable manufacturing cost per unit $8.00 ...

Solution Summary

This solution is comprised of a detailed explanation to answer what is the Year 2 operating income.

$2.19