The difference between variable costing and absorption costing is that the fixed manufacturing overhead is included as a product cost under absorption costing.
So, in order to employ absorption costing, we have to compute a per unit production cost, including the fixed manufacturing cost.
The expenses here are:
direct materials: $4/unit
direct labor: $3/unit
variable manufacturing overhead: $2/unit
variable selling and administrative costs: $ 1/unit
fixed manufacturing overhead: $25,000
So, because absorption costing includes this $25,00 cost in the calculation of the per unit cost, and because 5,000 units were sold, the per unit cost using absorption costing is
$10+$5 = $15
fixed selling and administrative costs: $10,000
The equation for net operating income under absorption costing is:
net sales revenue - costs of good sold - selling and administrative costs = operating income.
So, we have:
(4,600 units * $30/unit) - (4,600 units * $15/unit) - ($10,000 fixed selling and administrative costs) = $59,000 operating income.