-) Calculate the operating income for each market using Total absorption costing methodology and format (assume starting inventories and closing inventories are nill)

1.5 Absorption costing - FarmXL Assembling industry (done in class) FarmXL is a company that assembles purchased parts into components for 3 distinct markets - farm tractors, lawn mowers, gardening hand tools. You are the management accountant of this company and you have been requested to calculate the operating income of each market using absorption costing. You have gathered the following information: Tractors 175 000 50 000 5 8 500 152 000 Lawn mowers 125 000 100 000 1 2 500 400 000 Gardening tools 100 000 200 000 0.5 1 500 248 000 Direct materials (total, in ) Direct labor (total, in ) Sales commissions (per unit, in ) Machine hours (used in assembly) Weight of components shipped to customers (in kilograms) Number of components assembled and sold (in units) Sales price per component (in per unit) 5 000 25 000 50 000 80 20 10 Indirect costs : 1/ Manufacturing indirect costs: machines are used to assemble the parts into components. Costs of the machines (depreciation, maintenance, utilities ...) is 87 500 . 2/ Transport costs to the customers' warehouses: 160 000 3/ General and administrative costs for the company are 281 250. These costs will be allocated out to each market based on gross margin per market