Homework Answers
Difference in net operating income will be caused by the presence of fixed manufacturing overhead in the valuation of finished goods ending inventory as per absorption costing.
Due to higher ending finished goods inventory in the absorption costing, cost of goods sold will be lower and thus operating income will be higher in the absorption costing.
Thus, operating income under variable costing will be lower than operating income under absorption costing.
Correct option is (B)
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Units in beginning inventory
0
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Direct labor
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Variable selling and administrative expense
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Fixed manufacturing overhead
$
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following data concerning its most recent month of operations:
Selling price
$
187
Units in beginning inventory
0
Units produced
3,180
Units sold
2,810
Units in ending inventory
370
Variable costs per unit:
Direct materials
$
52
Direct labor
$
58
Variable manufacturing overhead
$
15
Variable selling and administrative expense
$
17
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Fixed manufacturing overhead
$
111,300
Fixed selling and administrative
$
8,430
Required:
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