Answer:
Net operating profit= $230,000
Explanation:
The absorption costing method includes all costs related to production, both fixed and variable. <u>The unit product cost is calculated using direct material, direct labor, and total unitary manufacturing overhead. </u>
<u></u>
<u>First, we need to calculate the unitary cost:</u>
Unitary production cost= 19 + (240,000/40,000)
Unitary production cost= $25
<u>Now, the income statement:</u>
Sales= 37,000*42= 1,554,000
COGS= (37,000*25)= (925,000)
Gross profit= 629,000
Total selling and administrative cost= (7*37,000) + 140,000= (399,000)
Net operating profit= $230,000