Hanover Corp. obtained the following information from its absorption costing accounting records:
Operating Income = $24,000
Total Product Costs Incurred During The Period = $16,000
Value of Beginning Work-In-Process and Finished Goods Inventories = $0
Value of Ending Work-In-Process and Finished Goods Inventories = $0
Sales = $50,000
What is the total period costs incurred for this period?
To find the total period costs incurred for this period, we need to understand the concept of absorption costing. Absorption costing takes into account all the direct costs and indirect costs associated with producing a product. These costs are absorbed or allocated to the units produced.
In this case, the operating income is given as $24,000. Operating income is calculated by subtracting the total period costs from the sales revenue.
Operating Income = Sales - Total Period Costs
Total Product Costs Incurred During the Period is given as $16,000. Total product costs include direct materials, direct labor, and manufacturing overhead costs.
So, we can rearrange the formula to find the total period costs:
Total Period Costs = Sales - Operating Income
Substituting the values given:
Total Period Costs = $50,000 - $24,000
Total Period Costs = $26,000
Therefore, the total period costs incurred for this period is $26,000.